How to find the best startup valuation method
The value of your company depends on a number of parameters. For example: The reason why the valuation is done and the expectation of the person or company who associates a value to your startup. Additionally you also need to consider supply and demand, the typical market forces that define the price of your startup.
When you are talking to investors you need a basic idea of the valuation of your startup. Depending on your specific circumstances, one or the other valuation method tool is more suitable for your case. There is no perfect solution for choosing the best method to calculate the value of your startup, but there is a best-practice process: Use multiple methods and calculate a valuation range.
Common valuation methods
- Risk Factor Summation Method (RFS)
- Scorecard method
- Venture Capital Method
- Discounted Cash-Flow Method
- First Chicago Method
Using multiple methods during preparation will also help you in the negotiation process because it will give you a more robust understanding of the valuation process and the underlying assumptions you make.
On our platform we provide a set of tools that implement the different methods. The tools allow you to calculate a valuation range for your startup.
You can learn more about the different methods in the section Company Valuation and Cash Need on our platform where we cover these key points:
- Understand how different valuation methods work
- Being able to select the right evaluation method
- Researching benchmark data for valuation
- Understanding results and doing sanity checks
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