Valuation

The valuation of a startup is an estimate of its value. It is often used when a startup is looking to raise funds or attract investors. Valuation takes into account several factors such as projected growth, potential market, company assets, and revenue (if any).

How does valuation work?

Startup valuation is often based on estimates, since many young companies do not yet have stable revenue. Investors then look at factors such as the idea, the team, patents or technology, and especially growth potential. This can be done using different methods, such as the multiples method or discounted cash flow (DCF).

Concrete example

Let's take a startup developing a health app. It does not yet have significant revenue, but already has several partnerships with hospitals and strong growth potential in the digital health market. When it seeks to raise 1 million euros, investors may estimate the startup's valuation at 5 million euros based on its potential. This means they would receive 20% of the company in exchange for their investment.

Why is valuation important?

Valuation determines how much a startup can raise from investors and how much equity it must give up in exchange. A valuation that is too low can dilute the founders, while a valuation that is too high could discourage investors.

Need help evaluating your startup's valuation?

If you would like advice on your startup's valuation and how to attract investors, feel free to contact us via the contact form on our website. We would be happy to support you in your journey.