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"Your valuation is a multiple of your revenue. If you grossed $500,000 this year, expect $750,000 next year, and want a 2x forward valuation, you're worth --- d
by webwright 18y ago
"Your valuation is a multiple of your revenue. If you grossed $500,000 this year, expect $750,000 next year, and want a 2x forward valuation, you're worth --- do the math."
When I sold a consulting business, this was a good starting point, but how many online startups are valued this way? I'm not saying that it's not ridiculous that some properties get sold for gazillions with no revenue (and no prospect of it), but if these guys tie to a multiple of revenue (which I imagine is pretty close to zero) they are probably priced to low.
- aneesh 18y agoYeah, facebook's Microsoft round was valued at roughly 100x revenue which is a ridiculous multiple. Basically you're worth what people are willing to pay (which isn't very helpful, I know). See how you fit in strategically with the potential acquirer, and see how much leverage that gives you.
- tptacek 18y agoThere's no magic formula that produces valuations. But one way to think of them is as a negotiation about what the multiple is. Consultancies commonly sell for 1.5x-2x, because staff turnover means the acquiring company is really only getting a pipeline, some relationships, and maybe a few staff. Enterprise product companies commonly sell for around 5x. Security valuations oscillate between 5x and 15x (on the wildly successful side). Sometimes new, small startups sell for ridiculous high multiples because otherwise the total number would be too low. I'm not saying, "take your revenue and multiply by two". I'm saying, "think about the value you provide your acquirer in the abstract", and then put a multiple to it.