How To Give A Valuation To Your Startup!
Updated: Jun 16
What is the startup valuation? Why does it matter? How do people normally get to it?
Well, there are three key ways that most places will look at evaluation. Um, and we can help you with all of them at Argona Partners. The first one is called discounted future revenues. This is what we do when we create a proforma, we look at the next five years of growth that need to happen and then we discounted to today so we can see how much you're going to grow. We make the right assumptions based on real data in the world today, we look at competitors, we p
ut together that five-year projection, and then we discount it using mathematics that helped us to compare it against taxes, inflation. Anything else that might be happening in the next five years. And we get to a value based on where we think we'll be.
The next thing is called, like companies. We do this primarily on the cap table, which is the capitalization table, which is the list of all of your investors in a row and how much they own of your company. Which, if you're a really early stage startup, it's likely only a few people right now. But what we do is we help you not only create that capitalization. Um, but we also look at like companies and help to do some rudimentary mathematics, to help find a valuation of what companies will tend to be, um, on the larger valuation side. Discounted future revenues can be large, but it's most likely going to give you a slightly more mid tier asset idea of of your valuation.
Um, now the last thing is actu
al assets. This would be a lot of early stage companies are going to not own a lot of buildings or any kind of product or anything like that. So a lot of places that are trying to make an investment with you will look at your actual assets instead of these other options, because it's a much riskier investment into earlier stage companies. So why is evaluation important? All of the, all of the value of your company, your ownership, your personal stake in your company is dependent upon what somebody gives you as evaluation. So the closer you can get your discount on future revenues to be as accurate as possible with the best assumptio
ns possible, the better those will be and appear to investors like companies in your field. If you can find them and give examples of deals, and you can prove that you're on the pathway to being as great as those light. Um, that will also help you increase your revenues or increase your valuation. And then lastly, actual assets that will just naturally increase as you purchase things like buildings and you develop your, your company, you have more employees. Um, and generally that will be the last thing to, to rise in your evaluation.