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A 3 year old site which makes money through ads has received 23 million in Series A,B, and C funding. Any guess as to what it might be worth? Four times funding? Five times? Just curious as to whether there is a rule of thumb for valuating sites based on venture capital.

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If you know how much revenue and profit it is making it would be easier. If you know what % the investors got then it is trivial. I suppose you know neither of those. – TimJ♦ Nov 22 '10 at 20:01
Agreed, a P&L statement and/or comparables with published values would be handy. It also doesn't help that we don't know the service, the market size and growth rate, the presence of IP, etc... – alphadogg Nov 22 '10 at 21:03
The question was how much is this website worth. A business is only worth what someone is willing to pay for it. It doesn't matter how much you have invested if no one is willing to pay what your investors have put into the firm. The idea that you can compute a valude for a web site, based on what has been put into the company died with the internet bubble. – Gary E♦ Nov 23 '10 at 17:20

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There are some ways to try to triangulate on an answer.

  1. Under most circumstances, investors will not dilute the founders below 50%. When investors start owning more then 40-50% of a company, the founders tend to feel like sharecroppers and lose motivation.

    Therefore it's pretty safe to assume that the valuation on which those investments were based was somewhere in the $50MM range or higher.

  2. Most investors want to own at least 20%, or even 30% of a company.

    Therefore it's pretty safe to assume that the valuation was $100MM or lower.

  3. You can try to calculate the traffic based on Alexa or Quantcast data. If you know anything about the industry, you may be able to make a good guess as to the CPMs they're getting, how much inventory they are filling, and what the revenue looks like.

  4. You can try to figure out how many programmers they have. These days a good rule of thumb is that valuations tend to be in the range of $3-$4M per full time engineer.

In all four of these areas your mileage may (massively) vary, but it's a way to try to triangulate on a ballpark valuation that the investors are using. (Of course the VALUE is strictly in the eyes of the beholder).

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That would assume there's no strategic purpose to the purchase on the part of the buyers, correct? That usually allows the seller the inflate the valuation. The most egregious example of this principle would be Facebook. – alphadogg Nov 23 '10 at 13:45
Thanks Joel! I shoulda just mentioned the site - it's av vo. They are in a high profit ad sector - doctors and lawyers. I think it's safe to assume they would be in the 50 MM range with that kind of funding, at least. Also, last I checked, they have north of 50 employees. – Sam Nov 23 '10 at 15:17
Almost certainly between $50MM and $100MM. The investors in avvo are top notch, so rules #1 and #2 are very unlikely to be violated. – Joel Spolsky♦ Nov 23 '10 at 16:10
From TechFlash: "Avvo certainly has encountered a bumpy road along the way, since it was sued a few days after launching by an attorney who didn't like the rating system." Hilarious! – Joel Spolsky♦ Nov 23 '10 at 16:11
are we talking about diapers.com? – Frank Nov 24 '10 at 0:08
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It is not even possible to guess with the information you have provided. The website could be worth nothing, it could be losing huge amounts of money, or it could be making money.

Funding levels don't translate into value. You can pump millions of dollars into a stupid idea and still have a stupid idea. Or you can put just your own time, effort, and a bit of money into an idea and turn it into a multimillion dollar web site.

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Don't confuse value with valuation. Value is a wishy washy concept and everyone will have their own opinion. Valuation is a technical term that strictly means (price of last share that traded hands) * (number of shares outstanding) – Joel Spolsky♦ Nov 23 '10 at 4:00
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The question was how much is this website worth. A business is only worth what someone is willing to pay for it. It doesn't matter how much you have invested if no one is willing to pay what your investors have put into the firm. The idea that you can compute a valude for a web site, based on what has been put into the company died with the internet bubble. – Gary E♦ Nov 23 '10 at 17:21
up vote 1 down vote

The amount of venture capital raised often has little to the valuation. If the capital was consumed in pursuit of a business model that just didn't work, the value of the company could be far lower than the capital raised.

For example, my first startup acquired a company that had raised over $25 million in venture capital. We paid considerably less than that.

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