Tag: how to value a startup

As discussed in part 1 of this post on How To Value A Startup, valuing a pre-revenue stage startup is an art in and of itself. But, once a company has revenue, even if minimal, it becomes yet another factor worth considering in its valuation. The question becomes: Just how important, if at all, are early stage revenues in determining an accurate valuation? When it comes to valuing startups with revenue, there are 3 basic schools of thought: Quantitative: A company’s value is based heavily/solely on future cash flows – its ability to make money in the future. Hybrid: The ability to make money in the future is important, but there are other value-based metrics that also contribute to an accurate early stage valuations. Qualitative: Projecting a company’s future cash flows is a waste of time as it is not only inaccurate, but unrelated to its current valuation.  The 1st School of Thought: Quantitative The following methods are based on the assumption that people value a company based on its ability to earn money in the future. DCF (Discounted Cash Flow) DCFs are...