How to do Startup Valuation?
Market Multiple
This is the most common method of valuation followed by venture investors. In this market, multiple methods, recent acquisitions on the market by similar nature of startups are taken and a base multiple is decided on the basis of the value of recent acquisitions. This gives the base market multiple on the basis of which startup valuation is conducted. This valuation technique provides a fair idea to the investors regarding what the market is willing to pay for a company.
Cost to Duplicate
The motive behind this method is to ascertain how much cost will it take to build a similar startup from the scratch. To determine the fair market value of the business, the cost to duplicate method looks at the physical assets of the company. The idea behind this is not to invest more than what it costs in the company
Berkus Approach
This method was created by Dave Berkus, an American angel investor, and venture capitalist. It promotes valuing a startup on five major assessment factors including Basic Value, Technology, Execution, Strategic relationships in a core market, and Production & consequent sales.
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