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Startup Valuation: Theories, Models, and Future
Abstract
This chapter analyzes startups and methods for valuing them. Startup means a process for activating a job or action. Startup as a young innovative company has a dominant and key role in modern economies. Startups are newborn or young companies struggling to achieve their potential and growth. One of the most challenging issues in corporate finance is to decide on firm valuation. It is even more difficult to evaluate companies that do not generate income. Deciding the value of a Startup is similar to valuing a specific table. The valuation at this stage is very important. Since startup is a company, it is necessary to look at the methods developed specifically for Startups. Nasser (2016) determines 9 different valuation methods to determine Pre-Money Valuation; Berkus Method, Risk Factor Summation Method, Scorecard Valuation Method, Comparable Transactions Method, Book Value Method, Liquidation Value Method, Discounted Cash Flow Method, First Chicago Method, and Venture Capital Method. Traditional valuation methods are also applicable in valuation.
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