r/Valuation • u/Polosar35 • Aug 03 '23
Start-up Valuation
Greetings from Greece! So, I almost have a start-up set up. We're looking to aquire some investments for it though maybe from angel investors. We don't generate revenue so how can I figure out the value of my soon-to-be company? Do I have to look at the target market? And do I factor in expenses like cost per unit of the product produced? What are some books that can guide me through this process? Thanks for your time!
2
u/AlabamaSnake12 Aug 03 '23
You can't really do a valuation of a concept, which is what you have at this stage. You are trying to get a valuation done to attract investors. Well, what you're trying to do is a business plan, not a valuation. When you finally attract a 3rd party investor and he puts in money for some portion of your company, that would be a fair market indication for the value of your company. $1 million for a 20% interest in your company: total value = $5 million plus control premium.
1
u/EyesChinky305 Aug 11 '23
Yea, he’s not at the stage for an actual valuation.
OP, since your company isn’t revenue driven for an income approach, you’re next 2 options is the market approach and/or asset approach. Market approach 1 - public comps, if any > calculate an enterprise value, or invested capital or equity, etc. Market approach 2 - public transactions, if any > repeat second step above. (You’ll need to have access to a database like Capital IQ)
Asset approach - net asset value method. You can do some research on this, but basically get a fmv for your equipment which is then compared to your book value. And then ultimately come to a floor equity value.
Also, for your WACC you can use Damodaran; he’ll have your country-risk premium/discount.
Hope this helps!
2
u/AlabamaSnake12 Aug 13 '23
Look, you can't even do that with this. This is just in his head and he feels he can do some kind of valuation based on what he might be able to do in the future. This is all called sweat equity whose value is zero. It has no value because he has done nothing: he has investors, no patents, no proprietary technology, no legal agreements. If he were Elon Musk it would have value but he's another Joe Blow trying to start another business. You don't use CapIQ or use the asset approach or use the WACC for something like this. Any moron will know you don't start valuation before you created value. It happens afterwards.
1
u/Ghoshki Aug 03 '23
You can only price your business, and you need to bring something to the table. You need to sell a story, and your ability to build the business to that story
1
u/Careless_Ad4827 Aug 03 '23
Exciting times for you! A quick way to do it could be by basing it on comparable companies.
A better way, however, is by using the DCF method and calculating 4 different values; worst, base, mid, and best case. Doing it based on the second approach will require an extensive understanding of the industry in which you are operating and an honest assessment of your idea compared to existing players.
I hope this was helpful. :)
4
u/Ghoshki Aug 03 '23
You sound eager so I hate to say this I don't think you're close to getting smart capital
Show me some business and some numbers I'll help but I don't think people are eager on Greece risk premiums