Startup valuation methods aim at helping startup business owners compute the value of their company. As startups do not have much of a figure muscle to leverage, startup valuation techniques help them calculate the value of their business to attract investors, make vital business projections, etc.

If you are a startup owner looking forward to glancing through some vital startup valuation techniques, this blog helps you do so. It talks about a few of the most common startup valuation methods for deciding the one that suits best in your context.

 

4 Startup Valuation Methods:

Startup valuation approaches consider a range of factors such as investment, return on investment, risks, opportunities, market potential, competitors, projections, etc. Each of these methods is unique and proves significant from the viewpoint of determining the startup value.

  1. Discounted Cash Flow (DCF) Method

DCF focuses on projecting the cash flow movements of the startups. Valuers calculate the worth of the cash flow as against an RoI rate, termed discount rate. As startups constitute a new venture, they pose a high investment risk, and which is why valuers apply a high discount rate.

  1. Market Multiple Approach

This approach considers similar recent market acquisitions and determines a base multiple based on the value of recent acquisitions. They then use the base market multiple to value the startup.

  1. Berkus Approach

Berkus, developed by Dave Berkus, values a startup through an in-depth assessment of five key success factors: basic value, technology, execution, core market strategic relationships, and production and resultant sales. The assessment evaluates the value that these factors in quantitative measure can contribute to the total enterprise value.

  1. Future Valuation Multiple Approach

As the name suggests, this approach helps you project the RoI in the next five to ten years. It considers five-year sales projections, cost and expense projections, growth projection, etc.

Some other startup valuation methods include comparables method, scorecard valuation method, venture capital method, First Chicago method, etc.

Valuation India is a startup valuation firm that works with a range of startups from various industries. The firm uses the appropriate startup evaluation technique to help startups know their value, and make informed business decisions based on the determined value.

Leave a Reply

Your email address will not be published. Required fields are marked *