If you are a partner in a startup company, you’ve probably thought about what the dollar value of all your hard work is. It can be tough to know how to calculate the valuation of a startup, especially when it’s brand new. If your company is at a point in its evolution where you are considering investors, you will have to determine the value of it before serious investors will be willing to part with their cash. You have a few options for how to calculate the valuation of your company.
Most startup company entrepreneurs tend to think their company is worth more than it is. It’s understandable that they would think that since they are the ones with the long-term vision, and they know the true potential. When you want to figure out the value of your company, you can either hire someone to determine it for you, or you can do it yourself.
If you decide to figure out the value yourself, this infographic called How Startup Valuation Works by Funders and Founders is a great place to begin. If you are a startup company that is a website accumulating users, the faster you get the users, the more they add to the value of the company.
Anna Vital at Funders and Founders wrote an excellent post to accompany this infographic, which you can read by clicking on the link above. According to Anna, even if you don’t have a lot to show as far as traction goes, if you can accumulate 100,000 users in the first 6-8 months, you will have a good chance of raising a million dollars. Your company does not necessarily need a high valuation to attract investors.
It is fascinating to dig deep into what goes into the valuation of a startup, and to come up with a dollar value to place on it. After that, you can use that number to determine what percentage should be given to investors in exchange for their cash.
How To Determine The Valuation Of A Startup Company
(Click Infographic To Enlarge)