To some extent, valuing a startup can be a very subjective process, but it’s a process that nonetheless needs to be executed in order for startups to sell themselves and investors to know exactly what they’re investing in. There are a few startup valuation methods that make this a slightly more standardized operation, and can hopefully help you pin down the value of any given company. Whether you’re looking to sell, buy or provide equity for services, these are 7 methods you should follow in order to determine just how much a specific startup is worth. Survey the Current Market Which market does the startup in question fall under? Is that market growing or shrinking? The current direction of the market helps determine how successful the startup is going to be. A rapidly growing market will give a business a lot of room for growth, and consequently a higher valuation, while a shrinking market might mean the company is in for a difficult, uphill battle and will be worth less in the long hall. Use Comparables as a Startup Valuation Method Before a startup gets its first round of investment money, a logical system of how to value the startup is through comparing it to other, older companies that are similar to it. While we always want to believe our startups are unique and the first of their kind, it’s a healthy exercise to survey possible competitors and take note of which ones resemble our company most closely. Alternatively, if you’re thinking of investing in a specific startup, look for another company that shares characteristics with the one you’re interested in and see how much it was acquired for, so you can reasonably assume the business will reach a similar acquisition rate if developed successfully. Tools like Angelist provide data
There are often job opportunities that are attached to some very appealing companies, but these opportunities come with a possible catch: They can’t pay you (yet). However, the prospect of equity and holding some stake in a company’s future liquidity is alluring enough for some to take the job. There are many factors to consider when weighing your decision to work for equity vs. working for a steady paycheck. If you are ultimately leaning towards the equity direction, here are a number of things to take into account so that you’re prepared for what’s ahead. The Less Obvious Benefit of Working for Equity Aside from the sparkling ROI that’s hopefully staring at you from the future, working for equity is a wonderful way to feel like you’re an integral part of the company you're working for. Holding a share in your company tends to reinforce your commitment to the cause and helps you keep your eye on the prize when you're having a rough day at work or feel you’re caught in a humdrum routine, because you have your sights set on the end goal of your company’s success. You’ll be more motivated to work towards helping your company achieve that success when you’re working for equity, because their success equates to an attractive payday for you if all goes well. Make Sure you are Financially Stable We’ve mentioned before that it’s important for companies to be able to pay employees in equity while still taking away a nice percentage of the cut. In that same vein, you yourself have to be in a position to essentially be able to afford working for free. Working for a startup might mean needing to do some consulting on the side or taking on another part time job, depending on your financial
How to secure professional services for your business without spending any capital Is now something you can actually do, and your business will thank you for it. No matter the nature of your business, there’s a good chance that you’re going to require some outside services when you start out. If you want to stay lean as you grow, you can’t afford to create separate departments for web design, accounting, and marketing. Outsourcing will help you accomplish everything your startup requires to the best possible standard without breaking the bank. You may also want to consider when’s the opportune time to raise money for your startup. The problem arises when you don’t have the capital you need to fund these services. In that case, you might consider exchanging services for equity; meaning that you pay for the services with shares. It can be a great way to reduce your up-front expenses and it’s a common practice. Here are some tips that will help you decide whether trading services for equity is the right move for your business. Can You Handle it Yourself? Just because you can’t afford to pay for services up-front, that doesn’t mean paying with equity is your only option. Another solution is to handle your services in-house, although that comes with a number of caveats. Often, we are blind to our own weaknesses but it’s important to recognize that your web design will not be as good as that of a professional agency unless it happens to be something you have training in. Investing in web design is crucial as it pays back with serious ROI by building trust and making conversions. If you happen to have a member of the team who does have skills in this area – and you can afford to take them
Learn How Equity Crowdfunding Works and How to Ensure the Best Results! Today, there are more options than ever available to start-ups and product manufacturers that need extra funding to make their visions a reality. Equity crowdfunding is one of the better options for start-ups looking for financial backing and offers unique advantages when compared to other methods. However, how is equity crowdfunding different from regular crowdfunding? How is it different from finding an angel investor? In this post, we’ll take a closer look at what equity crowdfunding means, what caveats you need to be aware of and whether or not it is a good fit for your business. How Crowdfunding Has Changed the Game ‘Regular’ crowdfunding has long been a game-changing tool for small businesses that need an injection of cash to get their ideas off the ground. Raising money through crowdfunding sites like Kickstarter and Indiegogo, means collecting donations from backers sometimes purely as a gesture of goodwill. This type of crowdfunding can sometimes come in exchange for a discounted pre-order, a bonus of some kind or even a modicum of creative input. Crucially though, the start-ups maintain complete control over their business and are not giving away shares or signing any contracts. This is the perfect fit for a product that is inherently exciting like the Oculus Rift and particularly when those ideas might be seen as too risky for conventional investors. People backed the Rift headset because they wanted to play a role in the advent of virtual reality. They also wanted to be the first to sample such an exciting new technology and wanted to see the cyberpunk future they’d been reading about in science fiction become reality. However, not all startup ideas are so exciting. What if your idea is more B2B than B2C?