The scorecard method takes the typical pre-money valuation of comparable early-stage deals in a region and adjusts it up or down by comparing the company on weighted factors.
10 min read · Level 3
The value of the scorecard method is less in the number than in the table. When two investors disagree about a price, laying the comparisons side by side usually shows they agree on most factors and differ sharply on one or two, which turns a stalemate into a specific conversation.
The scorecard method begins with a benchmark: the average pre-money valuation of comparable pre-revenue deals in the same region and stage. Suppose that is 4,000,000.
The company is then compared with a typical deal on weighted factors. A commonly used set of weights:
Factor Weight Comparison Contribution Strength of team 30% 125% 0.375 Size of opportunity 25% 150% 0.375 Product or technology 15% 100% 0.150 Competitive environment 10% 75% 0.075 Marketing and sales 10% 80% 0.080 Need for more funding 5% 100% 0.050 Other factors 5% 100% 0.050 Sum of contributions 1.155
Each comparison says how the company looks against an average deal: 100% is typical, above is stronger, below is weaker.
Pre-money = 4,000,000 x 1.155 = 4,620,000
The method is simple to explain and anchored in the local market, but both the benchmark and every comparison are judgement calls.
Because it forces a structured comparison instead of an overall impression. Writing down that the team is stronger than typical but the competitive environment is weaker makes the reasoning visible and open to challenge.
It also keeps valuations connected to what local deals actually cost, which the VC method does not do on its own.
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Two investors apply the scorecard to the same company.
Investor A rates team at 125% and opportunity at 150% (as above): 4,620,000. Investor B rates team at 100% and opportunity at 110%, everything else identical: 0.30 + 0.275 + 0.15 + 0.075 + 0.08 + 0.05 + 0.05 = 0.98 Pre-money = 4,000,000 x 0.98 = 3,920,000
The difference of 700,000 comes entirely from two judgements. The method did not remove subjectivity; it showed exactly where it lives.
Using a benchmark from a different region, stage or year, or treating the weighted comparisons as objective measurements rather than opinions.
Use typical pre-money valuations of comparable deals in the same region, stage and recent period.
Judge each against a typical deal, and write down why.
Sum the weighted contributions to get an adjustment factor.
Change the comparisons you are least sure of and see how much the result moves.
When pricing a pre-revenue company in a market where comparable deal data exists.
Do not use it where there are too few comparable deals to form a meaningful benchmark.
Angel investor organisations have published descriptions of the scorecard method, often attributed to angel investor Bill Payne, as a way for angel groups to anchor pre-revenue valuations to regional averages and adjust for company-specific strengths and weaknesses.
The method was designed for angel groups making many small decisions with limited data.
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