How to Set a Proposed Company Value for an Idea-Stage Startup

When you create a startup group on EquityTake, one field makes most people stop and stare: Proposed Company Value. You have an idea, maybe a few notes, no revenue and no company number. And now you are being asked what the whole thing is worth.

It feels like a trick question. It isn't. You are not being asked for a valuation. You are being asked for a shared reference, a number that lets everyone in the group talk about proposed equity in the same units. This post shows how to pick one you can explain, how to test it, and when to revisit it.

What is a Proposed Company Value (and what isn't it)?

A Proposed Company Value is the value the group creator assigns to 100% of the business. It is a shared reference for discussing proposed equity. It is not an independent or professional valuation, and it is not a price anyone has agreed to pay.

Each proposed slice of equity then has a Reference Value:

Reference Value = Proposed Company Value × equity percentage.

If the Proposed Company Value is $20,000, a proposed 5% has a Reference Value of $1,000. If it is $100,000, the same 5% has a Reference Value of $5,000.

The full definitions, and how applications move from Pending to approved, are on How EquityTake works. The rest of this post is about the judgement call: which number to put in the box.

Why the number matters more than it looks

At the idea stage, the Proposed Company Value is really a price per percent. Divide it by 100 and you have what 1% of the business "stands for" in your group's conversations.

• At $20,000, 1% stands for $200.
• At $100,000, 1% stands for $1,000.

That matters, because people apply for equity with either Cash or Skills / Tasks, and both are read against this figure. Someone offering $1,000 in cash is asking for 5% at the first figure and 1% at the second. Someone offering to build the first version of a product is weighing their evenings against the Reference Value of the slice they ask for.

So the figure you choose shapes every equity conversation that follows. It doesn't need to be "right". It needs to be one you can explain, and one the group can live with.

How do you choose a figure when there is no revenue?

There is no formula that turns an idea into a correct number. There is a sensible way to land on a defensible one.

1. Start from the next stage, not the dream exit

Ignore what the business might be worth if everything goes perfectly. Ask what it needs to get through the next stage: the skills, time and any cash required to reach a working first version, a few real customer conversations, or whatever your first milestone is.

Then ask how much of the business you would reasonably share to get that done. If you would share a quarter of the business for the people and resources that get you through the next stage, the Proposed Company Value is the figure that makes that quarter's Reference Value feel like a fair description of what they are bringing.

2. Run the two-sided test

Look at the number from both sides of the table.

• The cash side: if someone offered cash equal to the Reference Value of, say, 5%, would you accept it for 5%? If that thought makes you wince, your figure is too low for you.
• The skills side: if a skilled stranger read your group and saw the Reference Value attached to the share they would get for months of work, would it look like a serious offer or a joke? If it looks like a joke, your figure may be too high or the slice too small.

You are looking for a number where both answers are "that seems fair enough to discuss".

3. Prefer round, explainable numbers

A round figure with one sentence of reasoning beats a precise-looking number with none. Write the reasoning in the group description or an early message: "We've set this as a reference for equity talks based on what the next stage needs. It isn't a valuation." Strangers can argue with a reason. They can only guess at a bare number.

Cash vs Skills / Tasks: same Reference Value, different meaning

Contributions on EquityTake are either Cash (money someone is prepared to put towards building the business) or Skills / Tasks (work, expertise, time or specific responsibilities).

Both get a Reference Value, but they mean different things. A Skills / Tasks application with a $1,000 Reference Value does not mean $1,000 was invested. It means the person is asking for a share whose reference, at your Proposed Company Value, is $1,000. Say this clearly in your group. Mixing up "reference" with "cash in" is the quickest way to create a false story about who owes whom.

For how to weigh different contributions against each other, see How to Split Startup Equity Fairly Among Founders and the short startup equity split page. Those cover the percentages. This post covers the number that sits behind them.

Too high or too low: what each does

Without inventing market norms, you can still reason about the direction of the error.

If the figure is high relative to the stage of the idea:

• Cash contributors get little equity per pound or dollar, so cash offers may not come.
• The Reference Values next to skills applications can look inflated, and that invites scepticism about the whole group.
• Strangers may read it as hype rather than a reference.

If the figure is low:

• You share a lot of the business for small cash amounts.
• Skilled contributors may see a tiny Reference Value next to months of work and assume the project isn't serious.
• It can be hard to explain later why the figure jumped.

Either way, the remedy is the same: say why you chose it, and invite the group to push back.

Let strangers pressure-test the number too

One of the most useful things about creating a startup group is that strangers evaluate and pressure-test your idea until you are surer it might work, or might not. The Proposed Company Value is part of the idea. Expect people to question it. That is useful.

If several thoughtful people independently say the figure doesn't match what you are asking them to build, that is information about the idea, not just the number. Perhaps the scope is bigger than you thought. Perhaps the next stage is cheaper. Either way you learn something before anyone has spent a year on it. Create a Startup Group Around Your Idea walks through the setup step by step.

If you are on the other side, joining a group and reading someone else's figure, the same two-sided test helps you judge whether the room is serious. How to Join a Startup Group Without Wasting Months covers the rest of that filter.

When should you revisit it?

The figure is a starting reference, not a promise. Natural moments to raise it with the group:

• The pressure-test changes the idea. A narrower scope or a different customer can change what the next stage needs.
• The team changes. New roles or a departure change who is building what.
• You move towards incorporating. Before anything formal, everyone should be clear that what was agreed on EquityTake was a proposal. Then take independent legal, financial and tax advice.

Be fair to people already approved. If someone's share was approved at one figure and you now propose another, talk it through openly with them. Silently changing the reference behind someone's equity is exactly the kind of private story that turns into resentment later. The first few weeks are when most of these conversations happen, so it helps to know how to run the first month of a startup group.

Pre-incorporation or incorporated: still proposals

Groups on EquityTake can be pre-incorporation (not yet a company) or incorporated (the business already exists). In both cases, equity on EquityTake is a proposed allocation. A pre-incorporation group's equity is an informal arrangement that does not create legal shares or ownership. An incorporated group's equity stays a proposal until the company has properly agreed and legally implemented it.

EquityTake does not issue shares, transfer legal ownership, hold investment funds or create legally binding equity agreements. Proposed Company Value, Reference Value and equity applications are tools for discussion.

Common mistakes

• Typing in a dream-exit number. It makes every Reference Value look absurd.
• Leaving the figure unexplained. Add one sentence of reasoning.
• Treating a Skills / Tasks Reference Value as cash invested. It isn't.
• Changing the figure without telling people already approved.
• Treating it as a valuation you can quote to investors. It is a group reference, not a professional valuation.
• Agonising for weeks. A defensible round number now beats a perfect one never.

FAQ

Is a Proposed Company Value a valuation?

No. It is the value the group creator assigns to 100% of the business as a shared reference for equity talks. It is not an independent or professional valuation.

How do I pick a Proposed Company Value with no revenue?

Start from what the next stage needs, decide roughly how much of the business you would share to get there, then run the two-sided test: would you take cash at that Reference Value, and would a skilled contributor see the reference for their slice as a serious offer? Choose a round figure and write down why.

What is Reference Value?

Proposed Company Value × equity percentage. A $20,000 Proposed Company Value and 5% equity gives a $1,000 Reference Value.

Does a Skills / Tasks application mean cash was invested?

No. The Reference Value is only the reference attached to that proposed equity.

Can the Proposed Company Value change?

Treat it as a starting reference that the group can revisit when the idea, the scope or the team changes. Discuss any change openly, especially with people whose share has already been approved.

Does setting a Proposed Company Value create shares?

No. Applications and allocations on EquityTake are proposed. They do not issue shares, transfer ownership or create a binding agreement by themselves.

Put a number on it, then let the group test it

If owning a business from scratch means writing down who owns what before the resentment starts, the Proposed Company Value is where that writing begins. How to Start Owning a Business from Scratch explains why that step matters.

EquityTake is free to use, and sign-in is the only gate. Create a startup group around your idea, set a Proposed Company Value you can explain, and let strangers tell you whether it holds. Or, if you'd rather join an idea than start one, browse startup groups.