When discussing valuation, startups needs to be able to demonstrate that they understand their industry completely. Who are your competitors? What are they doing that is similar?
Companies that help you measure what is going on are called “the Peer Group.” The Peer Group must be comprised of a mixture of public companies and private companies. What are companies like yours doing as far as fund raising and traction, and what are their value ranges?
The other important item is understanding, and being able to communicate clearly, what stage you are in. Are you in concept stage? Early development? Alpha/beta? Early revenue? This will not only clarify to potential investors exactly where you are in development but it will also help drive the discount rates used for valuation calculations.
In short, the discount rate measures business risk and the earlier stage you are, the bigger the risk. Between the Peer Group data and the stage of development, you can come up with value ranges that are appropriate. While valuation is both an art and a science, with probably more art in the very early stage, a startup needs to be able to demonstrate to a potential investor that they understand the space that they are in and the value drivers for that space and the above helps to accomplish this.
The workshop on Thursday will explore these concepts in great detail and even illustrate what can be done with the various data points.
Please follow directions and RSVP on Eventbrite. Sandbox Suites members attend for FREE!
Location: Sandbox Suites Silicon Valley 3295 Scott Blvd Santa Clara, CA 95054 entrance in the back of the building facing the parking lot. Here is a map