How to value a start up?

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Permalink Reply by Dipu James on February 19, 2010 at 3:07pm

which business/sector?

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Permalink Reply by Francisco on February 22, 2010 at 10:34am

logistic wharehouses

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Permalink Reply by Tunde Bello on February 23, 2010 at 9:12am

hello,
may be you should use the word, Evaluate or appraise!
be that as it may, i think the use of DCF will be based on your projections from the analysis
if the start up is going to get funds from loans or equity then at what rate?
thats the rate to use for you to get the NPV.
also note that, the cash flow will also be based on projections after the initial outlay!
you can start a business without the initial outlay.
if no cash is introduced, then value the assets introduce as preliminary or pre-operational expenditure
i hope i make sense here?
please revert if need be!

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Permalink Reply by Dipu James on March 2, 2010 at 7:03am

normally DCF gives us a value but as point out by many experts in this forum there are inherent risk associated with a start up. I used to take the beta of a similar running business to value a business but later understood that i was doing a blunder.

Normally the price of the share has to be governed by the return the share holders are expecting and in a start up it will be difficult to convince the investors. In such cases a price band will be fixed and based on the performance in the first year or few years the share price will be determined.

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