Wed, 7 October 2020
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
In setting the valuation for a startup, there are financial calculations, and then there are non-financial factors.
I call the non-financial factors the “soft side of valuations”.
These include the following:
Current market conditions -- as the market heats, up certain sectors turn ‘hot’ and therefore command a higher valuation than the numbers indicate.
Predictability - companies with recurring revenue streams and long-term contracts command a higher valuation because their revenue is much more predictable.
Customer concentration -- startups with a broader list of customers will survive longer. If a customer accounts for over half of the business, then this should be reflected in the valuation.
Pre-profitability -- for early-stage companies, those with profitability should command a higher valuation.
Pre-revenue -- for even earlier-stage businesses without revenue, intellectual property and customer forecasts come into play.
Start with the financial calculation and then refine the valuation from there based on these issues.
Direct download: EG_Sep_2020_Startup_Funding_Espresso_--_the_soft_side_of_valuations.mp3
Category:general -- posted at: 12:10pm CDT