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How to Understand Startup Valuation

Types of startup valuation

How to Understand Startup Valuation is an important issue for a startup CEO.

There are different types of startup valuation.  Each is appropriate for startups in different sectors at different stages in their corporate life cycle. The startup valuation methods will be different for each of:

  • Raising a round of investment

  • Borrowing money for your startup

  • Determining the selling price of your startup at the time of a financial exit

There are also geographic and situational differences. For example the investors on the American Shark Tank television show do not approach valuation in the same way as does Silicon Valley. Local accountants with experience in startup deals can help you understand how valuations are done for your situation in your city.

If you want to understand American approaches to startup valuation; please go to the Angel Capital Association (Website URL is in the References for this Post).

The front page of their Website says in part:

“Imagine the Power of 13,000+ Angels

The North American professional association of active accredited investors provides unparalleled access to trending ideas and professional knowledge to help improve returns and promote effective public policies for angels and startups. Although not a funding source, ACA provides entrepreneurs an inside view into how angels think.”

Please enter … Valuation … into the search box on the front page.  As of this writing you will receive 511 results. 398 of these include 2015.

Separately, you might read Chapter 1 titled Influencing Early-Stage Company Valuations – the Art Behind the Science; of the book Funding and Financial Execution for Early-Stage Companies by Rod Hoagland, 165 pages. John Gale was an invited member of the Editorial Advisory Board in the Entrepreneurial Strategy and Functional Experts group for this book. Please see page iii.  As of this writing this book is available from both Amazon in the US and Amazon in the UK.

FYI, John Gale’s White Paper, Startup Presentations to Angel/Seed Stage Investors and Partners: Recommendations for Best Practices is available on this Angel Capital Association Website at this page

Conclusion

First the startup CEO learns How to Understand Startup Valuation.  Then as a part of the Corporate Development strategy you should be influencing the valuation of your startup or SME to influence a more profitable financial exit.

References

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