A 3 year old startup has incurred expenses worth $2.5M till date and a revenue of $1M. They are currently at a negative $1.4M EBITDA and have come up with a valuation of $3M. Is this seem reasonable? How can I get a better understanding of their valuation?

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Depends on the industry and what they sell. Not sure that valuation adds up though.

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Valuation is low

Check comparable revenue multiples. The market has changed so much but last year valuations where north of 5M with no revenue. If they have high growths they might be able to support it through revenue multiples

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That’s my guess. They were zero/minimal revenue during the first 2 years. During year three they generated a positive EBITDA of $200K for that year based on $1.1M revenue and $1M cost.

Valuation is low. Should be closer to $20-50m based on VC dollars.

There’s no fundamentals for these valuations. It’s based on what someone else is willing to pay, backed by the Fed printing machine.

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