How do you value a private startup?

While many established corporations are valued based on earnings, the value of startups often has to be determined based on revenue multiples. The market multiple approach arguably delivers value estimates that come closest to what investors are willing to pay.

How do you calculate the enterprise value of a private company?

The company’s enterprise value is sum of its market capitalization, value of debt, (minority interest, preferred shares subtracted from its cash and cash equivalents.

How do you value a startup company?

Traditionally, a startup company’s book value is its total assets minus its liabilities. In other words, the Book Value method equates the net worth of your startup with your valuation. Bringing it all together As a startup founder, you need a valuation estimate you can justify to potential investors and trust for any other reason.

What are the startup valuation methods?

As we see, startup valuation methods vary based on the stage of business development. Founders must strive to get it right from the start as every stage is a stepping stone to the next. Founders must be well equipped with suitable strategies to justify their company valuation before approaching investors.

Is the book value method relevant for startups?

The Book Value Method is particularly irrelevant for startups as it is focused on the “tangible” value of the company, while most startups focus on intangible assets: RD (for a biotech startup), user base and software development (for a Web startup), etc. To read more about the Book Value method, click here

How do you value a pre-revenue company?

The value of such companies can be easily estimated using the EBITDA formula that calculates the value based on the company’s earnings before interest, taxes, depreciation, and amortization. However, startup valuation methods for a pre-revenue company cannot involve just one linear formula.