Valuation of a Startup Venture

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Posted by Bob on July 19, 19100 at 15:09:02:

A startup venture is often promoted by an entrepreneur who seeks equity investments from venture capitalists and other early-stage financial investors in the private market.

Relative valuation of such an enterprise with no publicly-traded companies for comparison is more difficult if not impossible if it is entering or pioneering a new industry.

Absolute valuation based on intrinsic value and other facets of investment valuation also is more difficult because there is little or no operating history and most of the equity in the venture is intellectual capital.

Under such highly speculative circumstances, the enterprise value is not estimated so much as it is negotiated. Stock pricing negotiations can be supported by investment models that estimate intrinsic value for a probabilistic range of scenarios, do input sensitivity analyses, and permit goal-seeking analysis of stipulated prices per share of the new startup venture.

The DCF Valuator at the website can make such estimates of intrinsic value per share of a new company in a new industry. These estimates and the supporting assumptions can be used for reality checks and boundary setting. This in turn may help achieve more satisfactory pricing negotiations and more reasonable prices.

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