How to Value a Startup – One Example

I often get the question about how to value early stage companies….indeed if you look at valuations for LinkedIn, GroupOn, Facebook or Twitter, you would wonder where the valuations come from based on the revenue those organisations have to date. But when it is a very early stage venture, the issue becomes even bigger.

So here is just one example I have noticed recently, and I would be interested in any feedback on whether this comes up with useful data. Either way it does ask some questions that early stage founders should be asking.

Cayenne Consulting who developed their model have been told by several investors that their valuation model produces reasonably good valuations. Of course, as they mention, every situation is different. The valuation model here is intended more for educational purposes than for performing serious valuations. At the end of day, startup valuations are largely determined based on qualitative attributes.