Revenue multiples in startup valuation

Method to calculate a company’s valuation based on its revenue. A multiple of 5x means that the company has a valuation of 5 times its annual revenue.

While EBIT(DA) multiples become more relevant for established companies, revenue multiples are often used in the startup world as most of them are not yet profitable. Strongly growing tech companies can reach revenue multiples of 10x or more.


A startup is generating monthly recurring revenues of USD 300k, growing at 10% month over month. Comparable companies are valued at 10x revenues. Using this metric results in a valuation of the startup of USD 36m (= 300k * 12 months * 10x).

Recommendation for entrepreneurs

A good understanding of revenue multiples in your industry is crucial – especially as you are growing the company. It is useful to start thinking about this once your revenues are starting to grow.

The best starting point is talking to some investment bankers. While the big ones (Goldman Sachs, JP Morgan etc) may not yet be interested in your startup, there are boutique investment banks that will be, even if you are early stage. Ask them about “comparables” (companies in similar areas) and typical multiples they see in your industry.

The resulting discussion can be very helpful – not only to better understand valuation but also to fine-tune your strategy. Multiples can differ wildly depending on your business model and industry. E.g., changing the positioning of a consumer hardware company to a digital health company with recurring revenues may have a huge impact on valuation.

Further reading

Understanding valuation is crucial in fundraising. Phase 2e provides further information about this topic.