How to use a startup valuation model
Start with the decision
Use a valuation model to explore a fundraising conversation, compare assumptions or understand dilution. Begin by stating the valuation date, reporting currency and whether the number represents enterprise value, equity value, pre-money value or post-money value. These are different measures and should not be used interchangeably.
Prepare consistent inputs
Collect revenue or ARR, growth, gross margin, cash, debt and expected funding needs. Separate historical actuals from forecasts. ARR is a recurring revenue measure and is not automatically the same as annual accounting revenue. Keep all monetary inputs in the same currency and note the period for every metric.
Compare methods rather than hiding uncertainty
A revenue multiple turns a revenue measure into an estimate using a selected multiple. Discounted cash flow estimates the present value of future cash flows and is sensitive to growth, discount rates and terminal assumptions. Early-stage qualitative methods weigh factors such as team, product and traction. Different methods can reasonably produce different ranges.
Use a transparent example
If annual recurring revenue is 1,000,000 SAR and an assumed multiple is 4×, the simple implied estimate is 4,000,000 SAR. This arithmetic does not establish that 4× is a suitable market multiple. Comparable-company evidence, business quality, debt, cash and transaction terms can change the interpretation.
Review the result
Change the inputs to build downside, base and upside cases. An unusually narrow range may hide uncertainty. A DCF terminal-growth assumption at or above the discount rate is invalid in a perpetual-growth model. Record your assumptions, compare with sourced evidence and use a qualified adviser where an independent valuation is required.
Where AI helps
Polaris AI can explain supplied calculations, identify missing inputs and suggest questions to investigate. It should not invent comparable transactions or replace the calculation engine. Review any claim of market evidence against the linked source. Outputs are planning aids, not investment advice.