How to value your startup?

If investors are telling you that your startup is worth $1 million, then that's what it's worth. You might think it's worth more. You might even know it's worth more because your company may have more than $1 million is liquid assets, or more than $1 million in receivables, or more than $1 million in sweat equity.

But if you're unable to raise money for your startup with a valuation above $1 million, then you'll have to accept the market valuation.

1. People: Whether startup has right set of people with experience and diversified background will make a big difference during valuation of any Startup. Usually asked by investors are who are your adviser, partners etc.
2. Idea: Whether your Idea is scalable and adaptable? Sometime having unique & niche idea may not qualify for high value, because then we have too much of dependency & risks. Also we have to make sure of the entry and exit criteria to protect from the competitor.
3. ROI: Return on Investment, finally its money how much I can earn for every pie spent.  How fast I can earn and how long I can earn out of your idea.  That’s why Profit & Loss account plays vital role in any business plan.

 These ideas are just based on my theoretical knowledge may be in reality there could be many other aspects to valuate any Startups.

My personal take on this is... A lot matters on your Past Performance in the Business World.

It might be an absolutely New Venture... But the Startup Valuation will depend greatly on WHO IS BEHIND THE VENTURE ?

Investors need 'Confidence' to back a Project, they need to feel 'Safe' with placing their Money. If the Venture is started by a Person who has had a good track record in the Past... then Investors will go for it, even thought the Idea may be New & Untried.

I wld like to site an example of IPL, since it is the current Flavour of the Season. IPL in its First Year itself was valued highly ( which might look Low, compared to today's valuation ), BUT think 2 yrs back. The Valuation was high because it was backed by none other than the BCCI.

Do you think Mr. Lalit Modi on his own could have been able to pull off such a Venture with such a high valuation ?  NO !

So... a strong Past Performance assures a VERY GOOD STARTUP VALUATION !

Happy Debating Friends...

One can show the world the true value of his/her company by its performance. After all, if investors think the startup is worth $1 million, it's usually because of something you've told them. By definition, startups don't have a history of financial performance on which to base a valuation.

Therefore, it's up to the entrepreneur to develop a process for valuing the company based on comparables and financial projections.