This document discusses 7 methods for valuing a startup company: 1) Berkus Method, 2) Comparable Transactions Method, 3) Scorecard Valuation Method, 4) Cost-to-Duplicate Approach, 5) Risk Factor Summation Method, 6) Discounted Cash Flow Method, and 7) Venture Capital Method. It provides a brief overview of how each method works and the key factors considered. The main benefits of startup valuation are determining the company's actual worth, aiding decision making, setting goals, securing insurance, and determining share value.

1. Startup valuation is the process of
quantifying the worth of a company, aka its
valuation.
BENEFITS AND
IMPORTANT MATHODS
OF STARTUP VALUATION

2. BENEFITS OF
STARTUP
VALUATION
Valuation is the method of determining the company's actual
worth with the help of its assets and numerous valuation
models
Valuation helps to know your business, so a startup valuation
helps in decision-making
With the correct report of the startup valuation, the
entrepreneur can determine the future of the company and its
current state to set attainable goals

3. BENEFITS OF
STARTUP
VALUATION
Having proper data on startup valuation helps claim
insurance, which will help when the company does not
flourish
Startup valuation helps to know the actual worth to ask
for the amount your venture deserves during mergers
It helps entrepreneurs determine the value of the
company's shares and set them for sale

4. 2. Comparable
Transactions Method
1. Berkus Method
EVALUATE YOUR
STARTUP
7 IMPORTANT METHODS TO
3. Scorecard Valuation
Method
4. Cost-to-Duplicate
Approach
5. Risk Factor
Summation Method
6. Discounted Cash
Flow Method
7. Venture Capital
Method

5. METHOD
BERKUS A venture capitalist created the Berkus Method to
figure out valuations specifically for a pre-revenue
startup, i.e. businesses not yet selling their products
at scale.
The idea is to assign dollar amounts to five key
success metrics found in early-stage startups.
The simple formula helps founders and investors
avoid faulty valuations.
The formula:
If it exists - Add to company
value up to
Sound Idea - $500,000
Prototype - $500,000
Quality Management Team - $500,000
Strategic Relationship - $500,000
Product Rollout or Sales - $500,000

6. METHOD
COMPARABLE
TRANSACTIONS
For example, if a fictional shipping startup was
acquired for $24 million. There are 700,000 mobile
app and website users, roughly $34 per user.
You can also find revenue multiples for similar
companies in your sector.
It might be normal for SaaS companies to generate
5x to 7x the previous year’s net revenue.
The Comparable Transactions Method is one the
most popular startup valuation techniques since it
is built on precedent.

7. METHOD
SCORECARD
VALUATION
It also works by comparing your startup to others
already funded but with added criteria.
Strength of the team: 0-30%
Size of the opportunity: 0-25%
Product or service: 0-15%
Competitive environment: 0-10%
Marketing, sales channels, and partnerships: 0-
10%
Need for additional investment: 0-5%
Other: 0-5%
Pre-revenue businesses can also use a Scorecard
Method.
It also works by comparing your
startup to others already funded but
with added criteria -

8. APPROACH
COST-TO-
DUPLICATE
You can add up the fair market value of your
physical assets.
One major drawback is that this method inherently
doesn’t capture the full value of a company,
particularly if it’s generating revenue.
While calculating your startup’s valuation, you might
have to ignore elements that are relevant, like your
customer engagement.
The method helps you to figure out how much it
would cost to recreate your startup elsewhere,
minus any intangible assets, like your brand or
goodwill.

9. METHOD
RISK FACTOR
SUMMATION
Start with an initial valuation based on the other
methods mentioned here. Then decrease or
increase the monetary value in multiples on the risk
factors that affect your business.
Management
Stage of the business
Legislation/political risk
Manufacturing risk
Sales and marketing risk
Funding/capital raising the risk
Competition risk
Technology risk
Litigation risk
International risk
Reputation risk
Potential lucrative exit
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The method is broader for valuing startups.
12 common risk factors are:

10. METHOD
DISCOUNTED
CASH FLOW
It helps you to forecast future cash flows and then
apply a discount rate or the expected rate of return
on investment (ROI).
The idea is that investing in startups is a high-risk
move compared to investing in businesses already
operating and earning consistent revenue.
The method requires you to work closely with a
market analyst or an investor.

11. METHOD
VENTURE CAPITAL It helps to reflect the mindset of investors looking to
quit the business within several years.
Anticipated Return on Investment (ROI) =
Terminal Value ÷ Post-Money Valuation
Post-Money Valuation = Terminal Value ÷
Anticipated ROI
1.
2.
The method is a go-to for venture capital firms and
another option if you need a pre-revenue valuation.
The two primary formulas:

12. YOU
THANK
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