Pre-Revenue Startup Valuation: Berkus Method vs Scorecard Method Compared
How do you value a startup that has no revenue? Two of the most widely used frameworks — the Berkus Method and the Scorecard Method — offer structured approaches to this challenge. This guide compares both methods side-by-side, walks through Indian startup examples, and explains when professional valuers use each approach.
Why Pre-Revenue Valuation Is Different
Traditional valuation methods like DCF rely on historical cash flows and projectable revenue streams. Pre-revenue startups have neither. Instead, value resides in the quality of the idea, the team's ability to execute, the market opportunity, and the progress made toward reducing key risks. Both the Berkus and Scorecard methods attempt to quantify these qualitative factors into a defensible valuation number.
The Berkus Method Explained
How It Works
Created by angel investor Dave Berkus, this method assigns a value of up to ₹50 Lakhs (adapted for Indian context; $500K in US) to each of five risk-reducing factors. The maximum pre-money valuation is ₹2.5 Crores.
| Factor | What It Measures | Max Value |
|---|---|---|
| Sound Idea | Attractiveness of concept and basic business risk | ₹50 Lakhs |
| Working Prototype | Technology risk reduction | ₹50 Lakhs |
| Quality Management Team | Execution risk reduction | ₹50 Lakhs |
| Strategic Relationships | Market risk reduction (partnerships, early customers) | ₹50 Lakhs |
| Product Rollout / Sales | Financial and production risk reduction | ₹50 Lakhs |
Berkus Method Example: Indian EdTech Startup
Case: "LearnBridge" — AI Tutoring Platform
Stage: Pre-revenue, MVP built, seeking angel round
| Factor | Assessment | Value Assigned |
|---|---|---|
| Sound Idea | AI-personalised learning for CBSE/ICSE — large TAM, strong demand | ₹40 Lakhs |
| Working Prototype | MVP with 500 beta users, 82% retention | ₹45 Lakhs |
| Quality Management | IIT founders, ex-Byju's CTO — strong credentials | ₹50 Lakhs |
| Strategic Relationships | 3 school partnerships signed, AWS credits secured | ₹30 Lakhs |
| Product Rollout | Not yet launched commercially | ₹10 Lakhs |
Berkus Valuation: ₹1.75 Crores pre-money
The Scorecard Method Explained
How It Works
Developed by Bill Payne, the Scorecard Method starts with the average pre-money valuation for recently funded startups in the same region and sector, then adjusts up or down using weighted factor scores. Each factor is scored as a percentage (e.g., 125% means 25% above average) and multiplied by its weight.
| Factor | Weight | Scoring Basis |
|---|---|---|
| Management Team | 30% | Experience, track record, completeness of team |
| Size of Opportunity | 25% | TAM, growth rate, market timing |
| Product / Technology | 15% | IP, technical moat, prototype completeness |
| Competitive Environment | 10% | Barriers to entry, existing competitors |
| Marketing / Sales Channels | 10% | Go-to-market readiness, channel partnerships |
| Need for Additional Funding | 5% | Capital efficiency, runway needs |
| Other Factors | 5% | Regulatory, geographic, timing advantages |
Scorecard Method Example: Same EdTech Startup
Applying Scorecard to "LearnBridge"
Regional average pre-money valuation: ₹1.5 Crores (Chennai angel round average, 2025–26)
| Factor | Weight | Score | Weighted Factor |
|---|---|---|---|
| Management Team | 30% | 130% | 0.390 |
| Size of Opportunity | 25% | 120% | 0.300 |
| Product / Technology | 15% | 125% | 0.188 |
| Competitive Environment | 10% | 90% | 0.090 |
| Marketing / Sales | 10% | 100% | 0.100 |
| Additional Funding Need | 5% | 110% | 0.055 |
| Other Factors | 5% | 115% | 0.058 |
| Total Adjustment Factor | 1.181 | ||
Scorecard Valuation: ₹1.5 Cr × 1.181 = ₹1.77 Crores pre-money
Head-to-Head Comparison
| Dimension | Berkus Method | Scorecard Method |
|---|---|---|
| Creator | Dave Berkus (angel investor) | Bill Payne (angel investor) |
| Approach | Absolute value per risk factor | Relative to regional average |
| Requires Benchmark Data? | No — standalone scoring | Yes — needs average valuation |
| Maximum Valuation | Capped (₹2.5 Cr) | Uncapped (can exceed average) |
| Best For | Very early ideas, no comparable data | Active funding markets with comparables |
| Subjectivity Level | High | Moderate (anchored to market) |
| Investor Acceptance | Angel rounds, idea stage | Angel and pre-seed rounds |
| Indian Context Fit | Good for Tier 2/3 cities with sparse data | Better for Bangalore/Chennai/Mumbai |
Professional Valuer's Recommendation
Best Practice: Use Both + Risk Factor Summation
In our practice, we never rely on a single pre-revenue valuation method. The standard approach involves applying Berkus, Scorecard, and Risk Factor Summation methods in parallel, then triangulating the results into a defensible range. For IBBI-compliant reports, these methods provide supporting context alongside a primary DCF or NAV approach with probability-weighted scenarios.
- Use Berkus for quick sanity-check of absolute value caps
- Use Scorecard when regional funding data is available
- Use Risk Factor Summation for granular risk adjustment
- Present the range across all methods for credibility
Frequently Asked Questions
The Berkus Method assigns up to ₹50 Lakhs to each of five risk-reducing factors: sound idea, prototype, quality management team, strategic relationships, and product rollout/sales. The maximum pre-money valuation is ₹2.5 Crores. It is designed for pre-revenue startups where DCF analysis is impractical.
The Scorecard Method compares a target startup against the average pre-money valuation of recently funded startups in the same region and sector. It assigns percentage weights to factors like management team (30%), market size (25%), product/technology (15%), and others, then calculates an adjustment factor applied to the benchmark valuation.
Both have merits. Berkus works better for very early-stage ideas where comparable data is scarce. Scorecard is more robust when regional funding benchmarks are available. Most professional valuers use both methods alongside Risk Factor Summation and cross-check results for a defensible range.
For IBBI compliance and regulatory valuations, these serve as supporting approaches. IBBI standards typically require DCF or NAV as primary methods, with Berkus/Scorecard providing supplementary context. For very early-stage companies, these methods may be referenced with appropriate disclaimers about their qualitative nature.
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