What is the Berkus Method for startup valuation?
Short Answer
The Berkus Method values pre-revenue startups by assigning values (typically up to £500K each) to five key milestones: sound idea, prototype, quality team, strategic relationships, and product rollout.
Full Explanation
The Berkus Method, developed by angel investor Dave Berkus, is commonly used for early-stage startup valuations. It works by identifying five risk-reduction factors and assigning values to each as they are achieved: Sound Idea (core concept is viable), Prototype (working model exists), Quality Team (founders and early hires are credible), Strategic Relationships (partnerships or customer commitments), and Product Rollout/Sales (revenue or clear path to revenue). The sum of these values represents a reasonable valuation for an early-stage company. For example, if each factor is valued at £400K, a startup that has achieved all five factors might be valued at £2M. The beauty of the Berkus method is that it makes intangible asset value explicit — it directly values the team, the technology (prototype), market access, and business model readiness. It is most applicable to pre-Series A startups. Once a company has meaningful revenue or comparable transaction data, other valuation approaches become more reliable.
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