3 ms·
How does one value a company?
A recent HN post caused me to wonder how companies are valued [1].
Many people argue that tech companies are overvalued. I would like to try to value companies based on information I read. I'm wondering how you value startups/VC funded companies? I have no experience in this domain but I want to learn your secrets.
* Do you recommend any books?
* What are the most common valuation strategies?
* Does the value calculation depend on the type of company? (Logistics vs Tech vs Biotech vs Construction)
1. http://blog.eladgil.com/2016/07/end-of-cycle.html
- athenot 10y agoJust like anything else, the value is what you think others are willing to pay. It's just that for companies, the market is highly illiquid so you don't know exactly how much a company is worth until someone bought it, be it an acquirer or a stock exchange market. Of course, this won't help you on a practical way, but it helps explain why it's not something with a simple formula. To value a company, you need to consider what stage they are in. Early on, you are valuing the team more than anything else and there are simplistic formuals like the Scorecard[1] method. For SaaS companies, valuation is sometimes expressed as a multiple (typically 5x) of ARR, but again that depends on the stage and the domain. But overall, it's what you feel comfortable it is worth. [1] http://worthworm.com/valuation-methods-spotlight-on-the-scorecard-method/ http://worthworm.com/valuation-methods-spotlight-on-the-scor...