Venture Financing:

Business Valuation

Valuation of a Start-up Company



Vadim Kotelnikov personal logo Vadim Kotelnikov

Founder, Ten3 Business e-Coach Inspiration and Innovation Unlimited!



Nine Typical Ways to Value a Start-up Company

  1. Sales multiple

  2. Price-earning ratio

  3. Free cash flow model

  4. Book value

  5. Liquidation value

  6. Replacement value

  7. Similar company transaction (comparable)

  8. Internal transaction price

  9. Discounted cash flow

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Valuation Quantification Techniques

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Balance Sheet Methods of Business Valuation

Income Statement Methods of Valuation

Valuation of start-up companies is highly subjective. It is rather art than science. Proper valuation of the entrepreneurial business is the seminal event in the corporate maturation process however and it becomes an absolute requisite when the entrepreneur wants to raise private or public capital. Once the company is properly valued, then the entrepreneur can determine how much of the company can be sold for the capital injection provided by the investor or venture capitalist.

Venture Financing Funnel    

Venture Financing: Key Documents

No matter how enthusiastic each party seems, it always comes down to valuation.


The  most common start-up business valuation approaches include:

  • Cost approach (uses the valuation information to restate the asset at fair market value)

  • Market approach (gathering data to value developing assets; uses actual market derived data, comparing and correlating subject company to market comparable)

  • Income approach (connects data to value of developing assets).