How do I actually value a pre-revenue startup, and where does the seed number come from?
The short answer
At pre-revenue seed, valuation is not a spreadsheet output, it is a negotiation anchored by how much you raise and how much dilution you accept (usually 15 to 20 percent). Work backwards: decide the round size, target roughly 15 to 20 percent dilution, and that implies your post-money. Comparable rounds, investor demand, and your traction move the number, not a DCF. In India, don't over-anchor to US valuations, local seed rounds price lower and that is fine.
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Why we picked it
YC's answer to what you need before a seed round is not a revenue number, it is a rate: raise once your product is being adopted at an interestingly rapid rate, with 10 percent per week for several weeks cited as impressive. That reframes the whole question for an Indian founder sitting on modest absolute numbers: a small base growing fast beats a large-looking base that is flat. Use it as the counterweight to the Blume floor.
The readiness test is a growth rate, not a milestone: a product being adopted at an interestingly rapid rate, with 10 percent week over week for several weeks called impressive.
Raise when you have figured out the market and built something people are adopting fast, not before you have that signal and not after you have already stalled.
Minimize time in fundraising mode: a tight, fast-growth story lets you raise quickly and get back to building instead of dragging a weak deck around for months.
Why we picked it
This is the India reality check that stops you anchoring to US numbers. It puts the median Indian seed ticket at roughly $1M (flat), against a US seed median many multiples higher, and shows early-stage as the smallest slice of the pie ($406 Mn) while late and growth stages soak up the capital. That is the concrete evidence that pricing your local seed lower than a US comp is normal, not a failure.
The median Indian seed ticket sits around $1M, so an Indian seed round is priced well below a US seed and that is fine
Early-stage funding is the thinnest slice ($406 Mn in H1 2025) while late and growth stages dominate, so seed capital is genuinely scarcer here
Deal volume matters more than headline totals: a few $100M+ mega deals inflate the aggregate, so read stage-wise figures, not the top-line number, when benchmarking your round
Why we picked it
When a term sheet lands and you are tempted to fight over the last point of valuation, this is the essay that reframes the decision. Graham reduces the whole dilution question to one line: give up n percent only if it makes the remaining (100 - n) percent worth more than the whole company was before, formalized as the 1/(1-n) break-even multiple (take 7 percent, the deal has to lift value by more than 7.5 percent to pay off). It teaches you to judge an offer on your average outcome, not on a valuation you can brag about.
Accept dilution only when the money improves your average outcome enough that the smaller slice you keep is worth more than the whole company was before
The break-even test is 1/(1-n): give up 7 percent and the raise must increase company value by more than 7.5 percent to be worth it
Valuation is not the thing to optimize: optimize the size of your slice of the eventual pie, which means picking money and terms that actually grow the company
