L08 - Valuation

Question 1

Market Capitalization Method

Answer 1

Publicly traded company

Share Value * Number Of Shares = Total Value

Question 2

Times Revenue Method

Answer 2

(Company with sales history in a mature market)

Value = Revenue stream over period of time * Multiplier

Multiplier depends on the industry and economic development

Examples…
Tech company might be valued at 3x their revenue
Service firm may only be valued at 0.5x their revenue

Question 3

How to value a startup

Answer 3

Like comparables in real estate market

Look at what other similar startups have recently sold for

- Similar industry
- Similar stage of company development

Mostly a negotiation of what the company value is determined by the buyer and seller (the startup)

For startups it ultimately comes down to lets make a deal

Question 4

Price Point

Answer 4

Agreed upon valuation of business that buyer agrees to buy it for, and seller agrees to sell it for