Tue, 2 March 2021
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
In raising funding, you’ll need to propose a value for the equity in your startup. This is called valuation. One way to determine it is to use the liquidation method.
Here’s how it works.
The exit value is set to the value of the business at liquidation, which means the value of all assets minus liabilities.
Assets include equipment, computers, servers, branding, and data such as customer lists.
Liabilities include debts, cost to let go employees, contracts and leases terminated, and taxes to be paid.
This values the business primarily for physical assets and branding.
It’s possible your computer code or prospect list would be of value as well.
When you sell the business for assets only, it’s often about 10% of what you could have sold it for if it were an ongoing business.
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