Start-Up Business Valuation

Start-up valuation is the process of calculating the value of a start-up company. Startup valuation methods are particularly important because they are typically applied to start-up companies that are currently at a pre-revenue stage. Start-up’s valuation should not be performed as a rule of thumb, or with black box practices that leave space for arbitrary conclusions. Traditional valuation approaches are methodological and grounded, but they need to be adjusted to capture the value of start-ups. A Start-Up Company will have multiple stages including Idea Stage, Development Stage, Start-Up Stage and Expansion stage. The valuation drivers and the final value conclusion will change based on stages of development. The purpose of the Valuation is to start a fruitful and transparent negotiation process between the parties involved. It shows the valuation of the company, its details, the financial projections and all the parameters involved, so that they can be easily discussed and, if necessary. It is useful to the Angel Investor. Valuation guidelines encourage the use of several valuation methods as they analyse the business value from different angles and result in a more comprehensive and accurate view. Following are the five valuation methods (Quantitative and Qualitative):

  • Scoreboard Method (Qualitative)
  • Checklist Method (Qualitative)
  • Investors Return-VC Method (Quantitative)
  • DCF with LTG Method (Quantitative)
  • DCF with EBITDA Multiple (Quantitative)

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