Pre-revenue start-ups
Valuing a start-up before it has revenue
A company with no trading revenue can still be valued, because the evidence a valuer works from before revenue exists is different, not absent.
- Built from the evidence a pre-revenue company actually has
- No typical pre-revenue figure or scorecard range
- Signed by a suitably qualified business valuer at Valuation Group
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- Part of Valuation GroupValuation Group Pty Ltd, ABN 48 702 469 252
- Signed report plus the company’s DCF modelBoth start-up tiers include the model
- Fixed, published feesScope and fee agreed before we start
- Clear reasoning, cited sourcesSourced to the ATO and legislation
What we value, and on what basis
- A valuation always starts with purpose
- Depends on purpose. Market value in its ordinary meaning for tax purposes
- Unit of valueDepends on purpose. Typically one ordinary share
- The method or methods the evidence supports
- The signed valuation and the company’s DCF model
Basis of value and unit of value
- Basis of value
- Depends on purpose. Market value in its ordinary meaning for tax purposes, including the ESS start-up concession market value test, or the basis a shareholders' agreement, constitution or transaction defines.
- Unit of value
- Depends on purpose. Typically one ordinary share, an option or right, a parcel of shares, or total equity value.
Yes. A company with no trading revenue can still be valued, because the evidence a valuer works from before revenue exists is different, not absent. Recent arm's length funding, milestones reached, intellectual property owned and cash runway each carry weight, and a discounted cash flow model built on the company's own documented assumptions is one input and a cross-check rather than the whole answer. What a valuation should never do is start from a rule-of-thumb dollar figure for "a company like this at this stage".
01Basis of value
What changes when there is no revenue to work from?
A valuation always starts with purpose and basis of value, not with the business itself. For tax purposes, market value takes its ordinary meaning unless the relevant provision specially defines it, an arm's length price between a willing but not anxious buyer and seller with no special value to a particular purchaser, and only information known or reasonably foreseeable at the valuation date can be used 1. A shareholders' agreement or constitution may define its own basis instead, often "fair value" with or without discounts, and that clause can override the general approach; in our view it should always be read before a method is chosen. For the ESS start-up concession, the market value conditions in s 83A-33(5) compare a right's exercise price with the market value of an ordinary share, or a share's discount with that share's market value, at the time the interest is acquired 2; the other eligibility conditions are covered on ESS and ESOP valuations. For tax purposes, the onus for a replicable and defensible valuation stays with the taxpayer even when a professional valuer is engaged, and acceptability usually depends on the valuation process rather than who conducted it 1. That applies whether or not the company has revenue yet.
02Evidence
What evidence exists before there's revenue?
None of this is guesswork. It is simply a different evidence set to the one a trading company offers.
Recent arm's length funding (SAFEs, convertible notes, priced rounds)
- What it shows
- What an investor was willing to pay for a particular instrument, close to the valuation date
- Its limit
- A round price is evidence of that transaction on its own terms. The ATO has published no rule that treats a round price as the market value of an ordinary share 3; in our view the two usually differ once class rights and timing are accounted for
Milestones reached (product, regulatory, commercial)
- What it shows
- Whether a binary risk in the plan has resolved
- Its limit
- How much weight a milestone carries is a judgement call, not a formula
Intellectual property owned and assigned
- What it shows
- What the company actually owns, free of encumbrance
- Its limit
- Unassigned founder or contractor IP is a diligence issue to fix, not value in itself, in our view
Cash runway and burn rate
- What it shows
- How long the company can operate before it needs more capital or revenue
- Its limit
- Cash at the valuation date feeds the equity bridge only to the extent it is surplus to the plan; runway itself is a risk indicator, not a value
Cost to recreate (a replacement cost approach)
- What it shows
- What it would cost to rebuild what exists today
- Its limit
- Cost is not value: a buyer will not pay to recreate something that does not work or has no market. In our view it is at most a cross-check, and it can overstate or understate value
A documented discounted cash flow model
- What it shows
- An enterprise value the company's own forecast and assumptions imply, before the bridge to equity and allocation across classes
- Its limit
- Built on the company's assumptions, used as one input and a cross-check, not the only method
Net tangible assets, Method Two of the safe harbour, where eligible
- What it shows
- Tangible balance sheet value, adjusted for preference share obligations
- Its limit
- Its safe-harbour protection applies only to the ESS start-up concession market value test, and only where the conditions below are met 4; outside that, net assets is one method among others
The detail and sources
The approved methods are available only where the company provides an ESS interest at the valuation time and its directors reasonably anticipate that there will not be a change of control within the 6 months after that time, and they apply only for the s 83A-33(5) market value conditions 4. Method Two also requires that the company has not raised capital (debt, equity or both) of more than $10 million in the 12 months immediately before the valuation time; at the valuation time, has been incorporated for not more than 7 years or is a small business entity; and has prepared, or will prepare, a financial report for the year in which the valuation time occurs 4. These thresholds were last checked for this page on 27 September 2026.
In our view a recent funding round is often the strongest evidence a pre-revenue company has, and one of the most often misread, because a priced round frequently gives investors preference rights, and SAFEs and notes convert on their own terms, so the price paid may not be the value of an ordinary share.
Why a SAFE's conversion price is not automatically the value of an ordinary share
Fictional numbers. Not market evidence. A fictional pre-revenue company, Example Cap Co, raises fictional capital through a SAFE carrying a valuation cap. On a later priced round the SAFE converts into a new preference class at the lower of the cap or the round price, ranking ahead of ordinary shares in a winding up. The cap sets the price of that conversion; it does not tell us what one ordinary share is worth on the valuation date, because the converted holding still ranks ahead of ordinary shares if the company is sold or wound up for less than hoped. The cap table below shows the class split after conversion only, not a number to be copied into a real company's valuation.
Illustrative. Fictional numbers.
Fictional numbers. Not market evidence.
For more on how we read a priced round, a SAFE or a convertible note as evidence, see recent capital raise as valuation evidence and SAFEs and convertible notes.
03Method
Why isn't a scorecard or Berkus-style score a valuation?
Scorecard methods, Berkus-style scoring and the venture capital method more generally are pricing tools investors use to negotiate a round: they compare a company against a rough set of factors, or apply a target return to an assumed exit value. In our view they are a useful sense check on how an investor might be thinking, not a valuation in the sense the ATO describes. The ATO expects a market valuation to be replicable and defensible, built from stated methods with stated reasons and, where possible, cross-checked against a second method 1. A scorecard produces a negotiating range; it does not, on its own, produce a value a board could sign off with the same confidence as a documented, evidence-led valuation.
The detail and sources
That is why this page does not publish a typical pre-revenue value, a scorecard range or a Berkus-style dollar figure. In our view any such number would be a heuristic dressed up as evidence, and it would not meet the ATO's description of a replicable, defensible valuation 1.
- Net tangible assets (NTA)
The value of a company's tangible assets less its liabilities. Under Method Two of the ESS start-up concession safe harbour, net tangible assets (disregarding preference shares), less the amount needed to discharge preference share obligations, are divided by the number of ordinary shares plus any preference shares that participate in residual assets on a winding up 4.
04DCF model
Where does a discounted cash flow model fit in?
A discounted cash flow model translates a company's own forecast, its milestones, its assumed costs and its assumed timing into a present value. For a pre-revenue company that forecast is necessarily more assumption than history, so a DCF works best as one input alongside the other evidence above, and as a cross-check against it, rather than as the single number a valuation rests on.
The detail and sources
The ATO itself lists a discounted cash flow model as one example of an alternative method a start-up can use outside the two approved safe-harbour methods, and a company using an alternative method remains protected only if it produces a value not less than an approved method it was eligible to use 5, 4. Where Method One of the safe harbour is used instead, the present value of anticipated future cash flows is one of four matters taken into account on a reasonable basis, alongside asset values, comparable business values, and appropriate uplifts and discounts for control, marketability and key person risk 4. Method One must be worked out by the company's CFO or a suitable valuer (who need not be independent of the company) and its methodology and value endorsed by a written resolution of the directors; a value worked out this way binds the Commissioner only for the s 83A-33(5) market value test 4, 6. Building the model does not make it the right primary method for every pre-revenue company; how much weight a DCF carries against the other evidence is a judgement made case by case.
05What we need
What will we ask for before we start?
Nothing is requested through this website. Once an engagement begins we ask for what we need through a private link, and work from what you send.
The detail and sources
Information a pre-revenue valuation typically needs
- ASIC company extract and group structure (all companies, incorporation dates)
- Constitution and shareholders' agreement, including any valuation, transfer or pre-emption clauses
- Fully diluted cap table, covering every class, option, SAFE, convertible note and warrant
- Terms of each share class (preferences, conversion, anti-dilution)
- Term sheets and subscription agreements for prior rounds (date, price, class, amount, investor and whether related)
- Cash position, monthly burn and runway
- Capital raised (debt and equity) in the 12 months before the valuation date
- Whether a financial report has been or will be prepared for the year
- Budget and forecast, with the assumptions and milestone plan behind them
- IP register and assignment deeds from founders and contractors
- Board minutes recording any pricing, raise or valuation decisions
- Whether a change of control or sale is in contemplation
- ESS plan rules and proposed grant terms, if ESS is the purpose
The full readiness list, including what changes for a later-stage company, is on the start-up valuation checklist.
06Fees
Which start-up fee applies to a pre-revenue company?
There is no single start-up fee. A company with one share class and no SAFEs, convertible notes or ESS is the Simple start-up valuation, $1,995 + GST; ESS work, SAFEs or notes, several share classes, or option-pool modelling is the Standard start-up valuation, $3,495 + GST. Both include the signed valuation and the company's own discounted cash flow model, delivery agreed before commencement. A start-up matter in dispute or heading to court is the dispute or court expert report, $4,495 + GST, delivery agreed before commencement. The tier follows the company's structure and the purpose of the valuation, not whether it has revenue yet: a straightforward transfer in a one-class company with no SAFEs, notes or ESS may be Simple; an ESS grant is Standard. Delivery time starts once payment and all required information have been received. A retrospective valuation date adds $495 + GST per date, and each additional entity in the group adds $795 + GST. See pricing for the full table.
Simple start-up valuation
A company with one share class and no SAFEs, convertible notes or ESS.
$1,995 + GST
Delivery: agreed before commencement. Delivery time starts once payment and all required information have been received.
- The signed valuation
- The company’s DCF model
- A valuation engagement, as described in the APES 225 guidelines we follow
Request a valuationNothing starts until you accept it.
Standard start-up valuation
ESS work, SAFEs or convertible notes, several share classes, or option-pool modelling.
$3,495 + GST
Delivery: agreed before commencement. Delivery time starts once payment and all required information have been received.
- The signed valuation
- The company’s DCF model
- A valuation engagement, as described in the APES 225 guidelines we follow
Request a valuationNothing starts until you accept it.
Dispute or court expert report
A start-up matter in dispute or heading to court.
$4,495 + GST
Delivery: agreed before commencement. Delivery time starts once payment and all required information have been received.
- The expert report
- Prepared for the court process
- A declaration of independence and conflicts
Request a valuationNothing starts until you accept it.
The detail and sources
As throughout, this report is prepared for the company, its board or its advisers; it is not advice to an employee or investor on whether to acquire, exercise, hold or sell.
07FAQ
What else do founders and boards ask?
Can a pre-seed company with no product yet be valued?
Yes, though the evidence is thinner. The evidence is usually the company's net assets, any genuine arm's length investment in the same class of share, and, for the ESS start-up concession only where eligible, Method Two net tangible assets 4. Money spent to date is context, not value. In our view the honest answer at this stage is often close to net assets unless there is real arm's length investment evidence to calibrate to.
Does building the discounted cash flow model cost extra?
No. Building the company's own DCF model is included in both the Simple and Standard start-up fees described above.
We have already raised money through SAFEs or convertible notes. Does that get left out?
No, it is evidence. The caps, discounts, maturity and conversion triggers in those instruments all affect the equity bridge and the allocation across classes. See SAFEs and convertible notes for how they are read as valuation evidence.
Is this the same report as a company's employee share scheme valuation?
Not necessarily the same document, though the evidence often overlaps. ESS work has its own basis of value and safe-harbour rules, covered separately on ESS and ESOP valuations.
Is a fair value figure for the accounts the same as this valuation?
No. Financial-reporting fair value (AASB 2 option values, AASB 13 fair value) is a different basis from market value for tax 1. We offer that work too, scoped and quoted separately from a market-value engagement.
This page covers the evidence question specific to a company with no revenue yet. For the full service across every stage of a start-up's life, see Startup Valuation. For a deeper comparison of methods across all stages, see How to value a startup.
Start-Up Valuations
Start-Up Valuations is a specialist division of Valuation Group Pty Ltd (valuationgroup.au) that prepares signed, evidence-led valuations for Australian start-ups at every stage of their funding cycle, from a founders-only cap table through SAFEs, priced rounds and ESS grants. What is different about a pre-revenue engagement is not a different set of tricks: it is the same documented process, built from the evidence a pre-revenue company actually has rather than from a benchmark borrowed from somewhere else.
Every engagement states what is valued: the whole company (enterprise or total equity value), one class of shares, a specific parcel, or an option or right. A discounted cash flow model produces an enterprise value; surplus cash, debt and convertible instruments are then bridged to equity, and equity is allocated across classes before any per-share figure is stated. Reports are prepared for the company, its board or its advisers, and are not advice to employees or investors on whether to acquire, exercise, hold or sell shares or options.
Sources (6)
- Market valuation for tax purposes (Guide). Australian Taxation Office. Current at February 2025. Accessed 27 Sep 2026. S009 abcde
- Income Tax Assessment Act 1997, section 83A-33. Commonwealth (text via ATO Legal Database). Current text as displayed 27 Sep 2026; inserted by No 105 of 2015. Accessed 27 Sep 2026. S006
- Market value (ESS in detail hub). Australian Taxation Office. QC82046 (no date shown). Accessed 27 Sep 2026. S010
- LI 2025/19 Legislative Instrument. Australian Taxation Office; Federal Register of Legislation. Made 9 Sep 2025; registered 11 Sep 2025 (F2025L01085); commenced 1 Oct 2025. Accessed 27 Sep 2026. S003 abcdefgh
- ESS, Safe-harbour valuation methods. Australian Taxation Office. Last updated 1 October 2025; QC45990. Accessed 27 Sep 2026. S002
- LI 2025/19, Explanatory Statement. Australian Taxation Office. 9 Sep 2025. Accessed 27 Sep 2026. S004
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