Five of the most common valuation models and techniques used to value HealthTech companies in 2025, from early-stage startups to more mature businesses

Valuing a healthtech company in 2025 is a complex process, as it involves both traditional financial analysis and a deep understanding of the unique dynamics of the healthcare and technology sectors. Given the rapid pace of innovation, the regulatory environment, and the increasing focus on data and AI, the most common valuation models and techniques have been adapted to fit this landscape.

Nelson Advisors outline five of the most common valuation models and techniques used to value healthtech companies in 2025, from early-stage startups to more mature businesses:

1. Comparable Company Analysis

This is one of the most widely used valuation methods. It involves comparing the target company to similar publicly traded companies or recently acquired companies. For healthtech, this means looking at metrics and valuation multiples of other companies in the same sub-sector (e.g., telehealth, digital therapeutics, medical devices).

Key Multiples Used: The most common multiples are Enterprise Value (EV) to Revenue, especially for high-growth, pre-profit companies, and EV to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for more mature, profitable companies.

Healthtech Specifics: This method is particularly useful for healthtech because it helps benchmark a company against market sentiment and investor appetite for a particular sub-sector. However, it's crucial to select truly comparable companies, considering factors like business model, growth stage, market size, and regulatory approval status.

2. Discounted Cash Flow (DCF) Analysis

The DCF method is a cornerstone of corporate finance and is used to estimate a company's value based on its projected future cash flows, discounted back to their present value.

Key Components: The model requires a detailed forecast of future revenues, expenses, and capital expenditures to arrive at a free cash flow figure. A discount rate (often the Weighted Average Cost of Capital, or WACC) is then applied to account for the time value of money and risk.

Healthtech Specifics: DCF is most effective for mature healthtech companies with predictable revenue streams and a clear path to profitability. For early-stage companies with little to no revenue, the assumptions about future growth can be highly speculative, making the model less reliable. However, it can be a valuable tool for scenario analysis, allowing a company to model different outcomes (best-case, base-case, worst-case).

3. Precedent Transaction Analysis

This method involves analyzing the prices paid for similar healthtech companies in past mergers and acquisitions (M&A) deals. It provides a real-world view of what a strategic or financial buyer is willing to pay for a company with similar characteristics.

Key Metrics: Similar to comparable company analysis, this method relies on valuation multiples like EV/Revenue and EV/EBITDA from past deals.

Healthtech Specifics: Precedent transaction analysis is especially relevant in the healthtech sector, where M&A activity is a primary exit strategy. The multiples from these deals often reflect a premium for synergy, strategic value, or intellectual property. It's important to look at recent transactions as the healthtech M&A landscape can change quickly.

4. Venture Capital (VC) Method

The VC method is a specialized valuation technique for early-stage companies that have not yet generated revenue or are burning cash. It values the company based on the expected return on investment (ROI) at a future exit event, such as an IPO or acquisition.

Key Components: The method works backward from a projected exit value. A target exit value is estimated by applying an industry-standard multiple to a projected future revenue or EBITDA figure (eg. in 5-7 years). Then, a desired rate of return for the investors is used to discount this exit value back to the present, and this is the pre-money valuation.

Healthtech Specifics: This method is particularly well-suited for healthtech startups, where the value is in the future potential of their technology, intellectual property, and market opportunity rather than current financial performance.

5. The Scorecard and Berkus Methods

These are more qualitative, "rule of thumb" methods often used for pre-revenue startups. They focus on non-financial factors that contribute to a company's success.

Scorecard Method: This method compares the startup to other startups in the region that have been funded by a VC. It assigns a base valuation and then adjusts it based on factors like the strength of the management team, the size of the market opportunity, the product, sales and marketing channels, and other risks.

Berkus Method: This method assigns a monetary value to five key factors: the soundness of the idea, the quality of the management team, the strategic relationship/board of directors, the product's effectiveness, and the company's first sales. Each factor is given a valuation up to a certain maximum (e.g., $500,000), and the total is the company's valuation.

Healthtech Specifics: For healthtech, the "product's effectiveness" factor would heavily involve clinical validation, and the "strategic relationships" factor would consider partnerships with hospitals, payers, or pharmaceutical companies. These qualitative factors are often critical for valuing early-stage healthtech companies before they have significant financial data.