How Early-Stage Startups in Indonesia Determine Their Valuation

How Do Indonesian Startups Set Their Valuation?

When early-stage founders in Indonesia begin fundraising, one of the most common questions is: "What should my company be worth?" Abraham Hidayat, Managing Partner at Skystar Capital, explains that valuation isn’t arbitrary—it’s built on market standards, financial models, and investor expectations. Founders who understand these foundations avoid overvaluing their company or accepting unfair terms.

What Are the Key Fundraising Terms Founders Must Know?

Before setting a valuation, founders must grasp core fundraising terminology:

1. Pre-money valuation – The company’s value before new investment is added.
2. Post-money valuation – Pre-money valuation plus the amount of new funding.
3. Dilution – The percentage of ownership a founder gives up when raising money.
4. Runway – How long the company can operate before running out of cash.
5. Term sheet – A non-binding document outlining key investment terms.

These terms are not just jargon—they’re the foundation of negotiation. For example, if a founder raises $100,000 at a pre-money valuation of $400,000, the post-money valuation becomes $500,000, and the investor receives 20% ownership (100k / 500k). This 20% is the dilution.

What Are the Typical Valuations for Each Funding Round?

Skystar Capital observes consistent patterns in Indonesia’s startup ecosystem:

• Pre-seed / Angel round: Pre-money valuation between $400,000 and $1 million. Funding raised: $100,000 to $200,000.
• Seed round: Pre-money valuation around $1 million to $2 million. Funding raised: $300,000 to $500,000.
• Series A: Pre-money valuation between $2.5 million and $5 million. Funding raised: $500,000 to $1 million.
• Series B: Pre-money valuation up to $15 million.

These ranges are not rules, but benchmarks. They help founders set realistic expectations. As Hidayat notes, "It’s not uncommon to see founders ask for a high valuation with no revenue or product. That’s when investors get surprised."

Why Is Market Norms the First Step in Valuation?

The most practical starting point for valuation is market norms. Founders should research what similar startups in their sector have raised and at what valuations. This creates a benchmark.

For example, if a healthtech startup in Jakarta has raised $1 million at a $5 million pre-money valuation, a new healthtech founder should not expect a $10 million pre-money valuation without significant traction. Market norms prevent founders from setting unrealistic expectations.

Hidayat emphasizes: "We’re not here to be tourists. We’re here to help founders. We understand the local pain points because we’ve been through them."

How Does Discounted Cash Flow (DCF) Work for Startups?

DCF is a financial model used to estimate a company’s value based on its future cash flows. The core idea: money today is worth more than money tomorrow.

"If I asked you, would you rather have $10 million today or $10 million in 10 years? Everyone picks today."

So, future cash flows are discounted to their present value using a discount rate—usually based on risk and opportunity cost. For example:

• A company expects to generate $6 million in cash flow in year 5.
• With a 10% discount rate, that $6 million is worth about $3.7 million today.

This method is highly technical and best done in Excel using NPV (Net Present Value) functions. While DCF is more common in mature companies, it’s still a tool investors use to assess long-term potential.

"It’s not just about today’s numbers. It’s about what the company could be worth in five years."

How Do Market Multiples Help Set Valuation?

For startups without consistent revenue, market multiples offer a faster, more practical alternative. Investors compare the startup to publicly traded companies in the same sector.

Common multiples used:

• Price-to-Earnings (P/E) – Market cap divided by net profit.
• EV/EBITDA – Enterprise value divided by earnings before interest, taxes, depreciation, and amortization.
• Price-to-Sales (P/S) – Market cap divided by annual revenue.
• Price-to-GMV – Market cap divided by gross merchandise value (common in marketplaces).
• Price-to-Loan Book – Used in fintech, based on total outstanding loans.

For example, if a similar SaaS company in Indonesia trades at a P/S ratio of 5x, and your startup has $1 million in annual revenue, a reasonable valuation would be $5 million.

"We look at public market comparables. What are the multiples of listed companies in the same space? Then we apply that to the startup."

This method is especially useful for early-stage startups that haven’t yet turned a profit.

What Else Influences a Valuation?

Beyond DCF and multiples, investors consider:

• Precedent transactions – How similar startups were valued in past funding rounds.
• Founder track record – A founder with a history of successful ventures can command a higher valuation.
• Market timing – Strong demand for a sector (e.g., AI, healthtech) can push valuations up.
• First-mover advantage – Being first to market can justify a premium.

Hidayat stresses: "No single method tells the whole story. We combine all of them."

Why Founders Should Avoid Overvaluing Their Startup

Overvaluation is a common mistake. Founders who ask for a $10 million pre-money valuation with no revenue or product risk alienating investors. As Hidayat says:

"It’s not impossible, but it’s rare. And when it happens, investors get nervous."

A realistic valuation builds trust. It shows founders understand the market and are open to negotiation. It also ensures the company can raise future rounds without extreme dilution.

How to Prepare for Your Next Fundraising Round

1. Research market norms – Know what similar startups have raised.
2. Use multiples as a starting point – Especially if you’re early-stage.
3. Build a DCF model – Even if you don’t use it directly, it helps you think about future cash flow.
4. Be ready to explain your assumptions – Investors will ask why you chose a certain valuation.
5. Keep dilution under 20% per round – This is a healthy benchmark.

"The goal isn’t to get the highest valuation. It’s to build a sustainable company with investors who believe in your vision."

Key Takeaways

• Founders should use market norms as a baseline for valuation, especially in early stages.
• Pre-money valuation is the starting point; post-money is pre-money plus investment.
• Dilution should ideally stay under 20% per funding round.
• DCF models value future cash flows but are more relevant for later-stage startups.
• Market multiples (P/S, EV/EBITDA, etc.) are practical tools for early-stage companies without revenue.