Valuation is a function of how much capital you need, opportunity size, the strength of your team, exit opportunities and a whole bunch of factors that are not based on revenue.

You would be much better off if you wait till your 1st revenue is coming in. Not just signed.

A reasonable value expectation for a Canadian SaaS business at your stage is between $1.5M - $ 3M pre-money.

So, at the high end, if you raised $1M at a $3M pre you would sell 25% of your company 1/ (3 + 1).

I'm in Canada, so if you have more questions just ping me (mark@startupcfo.ca).

There is a lot out there on this but I usually recommend to clients at your stage of development that they use convertible notes to avoid the whole valuation discussion at this stage of your development.

I've been through this a few times here in Canada. Happy to help. Ping me at: bradmarshall75@gmail.com

I agree that a convertible note is preferable at this stage

I agree with Mark on all counts -- re. expected valuation for a Cdn SaaS company and especially re. the importance of waiting until you have revenue in hand. The funding climate is still skittish (especially here in Canada) and you'll have a hard time getting either angels or the few remaining active VCs in the country on board if you are pre-revenue (I'm a founding member of the largest Canadian angel group, and a twice-funded CEO, so I've seen this from both sides).
Cheers and good luck.
--Richard

Speaking again as a Canadian

Valuations are done by outside valuation firms. You odn't negotiate it, the way you seem to be able to do in the USA.

But as I have posted elsewhere, here is the trick. For the purposes of a CPC or other CAD public company, there are some things to know about the effects of a valuation.

Suppose the valuation firm says your deal is worth 5 million dollars.

1) If the assets are "real" - cash, bonds, real estate, machinery, inventory, - then you get a "real" notation on that part of the valuation.

The shares you get for that portion might be free trading and not restricted.

2) But if a portion of the deal is not "real" - things like patents, goodwill, etc. - then a notation is made that this valuaiton is theoretical (I forget the word they use).

That means those shares are restricted and may be canceled if certain performance standards are not met. The terms of that are set by the supervising authorities, not by you or the broker.

Now .... this is matched against the value of the company you are vending into.

If there are 5 million shares outstanding (restricted and free trading) and the share price happens to be 1.00 - because 1,000 shares last traded ... the entire company is deemed to be worth 5 million - without question.

The fact that there may be only 500,000 in the till and nothing else does not enter into it.

The game is rigged to value up the pubco and value down the project being vended in.

Why ? well, quite simple. The brokers and their friends own the exchange in Canada and they own the pubco.

You are a supplicant, entering their domain.

Valuation companies in Canada are well known because they will have done 50 valuations for the exchange - and they know what is acceptable and what is not. You won't be able to influence them much. You take what you get.

That is why I prefer the US route - where the business of becoming reporting is between you and the SEC. The 15c211 is between you and any broker - limited to that transaction.

Easier and cheaper to "roll your own".

And if the TSE is so important, after you are listed in the USA, you can much more easily apply for a co listing on the TSE.

Best Wishes

Please keep in mind that an investor will get a position on a board (or two positions). Let's say you will raise $1M and will sell 25% of your company as someone suggested. After you will pay the lawyers, and all kind of fees (some of it back to investors in various forms), the amount will be a bit smaller. I do not know who are on your board now, but the moment you will get an investor their loyalty (especially the independent board member and all consultants that now work for you) will be with the investors, simply because they pay the bills (even if you will be signing their checks) and can potentially provide them with jobs in the future. I hope you do not expect to get the money without the performance milestons? You will have to sign for them. The terms of the agreement will be clear enough to explain what will happen to you, if the company will not perform according to those milestones. There is one thing, that may or may not be clear in that agreement. This investment will be a loan with your personal guarantee. In case, if it will not be clear, do not expect your company lawyer to point this out to you, because he is not your personal lawyer. The point that I am trying to make is that your situation may be a bit more complicated than it looks to a consultant, or I maybe too naive to believe that the consultants do not know better.