Two ingredients ultimately decide the success of a startup: First, an innovative idea, which is a solution to a consumer problem and is cost effective in nature, second, the availability of capital.
This is where Startup Valuation comes in.
A startup valuation services tells investors, venture capitalists, and angel investors, among others, the true worth of the firm they would be investing in. It assists them in determining the quality of investment they will make while also assisting a startup in realizing the full potential of the underlying idea.
Simply put, a startup valuation services in India provides an estimated market worth of a new firm. With established businesses, gauging the worth is relatively easy. We already have the revenues, expenditures, depreciation cost, some idea of brand worth, etc, to refer to and determine its present market valuation. However, things are comparatively difficult when dealing with startups. There’s no perfect way to value a newly emerged enterprise that has much less to offer in terms of reliable data.
The service providers assess the product market fit -- finding a good market and a product that can satisfy that market is what product-market fit is all about. They look at the annual recurring revenue trend, sales and marketing efficiency, and the trajectory of growth in the demand to determine the most important thing that matters to a startup: How much is it worth? This is a fairly complicated task done with a bunch of distinct mathematical models deployed according to the need and type of the startup. The most convenient way to do this is by subscribing to a valuation service. This brings us to our next point.
Every business needs valuation since it determines the share in the firm that an entrepreneur must provide to an investor in exchange for the needed funding. In exchange for a seed investment, a company with a higher valuation would offer a smaller share in the business. True measure of a company’s worth is the very first step in making a successful investment. This crucial step is best taken with correct guidance and forethought.
While the foremost reason for conducting valuation is to seek suitable funding at upper-end valuation, valuation services also help cover bases in cases where valuation is mandated by statutes. Companies Act 2013, for instance, mandates that a startup must obtain Valuation Report from a Registered Valuer before issuing shares under private placement or on a Preferential Basis. The service providers can also assist businesses in getting tax benefits and exemptions. The role of these service providers is, thus, multifold.
The service providers follow pre-set standards, which range from simple to sophisticated, involving qualitative variables and statistical analysis. Some of the more common ones include:
- Berkus Method
- Venture Capital Method
- Cost to Duplicate Approach
- Valuation by Multiples Method
- Comparables Approach
- Discounted Cash Flow Model
Correct estimate of a startup's market value is the first step towards knowing what supports and drives that value. Apart from providing an estimate of the startup's value, these valuation services assist companies with mergers, acquisitions, and dispositions and more.
These professionals help with various compliances and financial reporting; additionally, services like litigation, dispute resolution, and strategy planning are also a part of the service package.
It’s advisable to knock at the doors of investors only after your startup has reached a respectable revenue threshold – in the order of 20 to 30 lacs per month in revenues. The threshold will, naturally, vary with multiple factors, including the scale of operations and size of the capital.
Resurgent India has in-house experts with deep domain experience, who have mastered the art of startup valuation. We provide valuation services from a position of strength, with 1500+ valuations completed across diverse sectors.
Resurgent India has a pan-India presence and is empanelled with various PSU Banks and other financial institutions. Raising funds for your startup is one of the most important tasks to be invested in, and a good startup valuation service provider can be a boon for your business.