An overview of the unique circumstances and methods involved in appraising startup companies.

1. Business Valuation:
Startup Companies
Presentation by
Schwartz Heslin Group, Inc. (SHG)

2. Startups vs. Mature Companies
 Valuation specialists typically use historical
financial data to extrapolate the future value of
a business
 But startup companies have short operational
histories and little historical financial data

3. Startup Valuation
 Startups require a more creative valuation
methodology that considers, among other
factors:
 Quality of management
 Value of comparable companies
 Industry prospects
 Value of company IP
 Stage of development
 Working capital requirements

4. Management Team
 The quality of a startup company’s
management team is examined for:
 Past performance
 Skill level
 Experience
 An experienced and well-educated
management team can significantly bolster a
startup’s value

5. External Factors
 Comparable companies
 Valuation
experts examine the value of similar
companies as benchmarks
 Industry prospects
 Startupsin expanding market spaces are
generally valued at higher multiples than those in
stagnant or shrinking spaces

6. Company Intellectual Property
 A startup’s IP can often be its most valuable
form of asset
 Valuable IP can be crucial to giving a startup a
competitive advantage
 Potential buyers look for valuable IP that can be
deployed in new areas or can form the basis of a
new service or product

7. Stage of Development (1)
 A more mature company will be valued at
higher multiples than a less mature one
A young startup is often considered to have:
 A less stable and consistent customer base
 A less established or well-known brand
 An unproven product or service

8. Stage of Development (2)
 Potential buyers will often look for certain
development benchmarks as signs of a
maturing enterprise
 How close is the company to breaking even or
becoming profitable?
 Is the company generating positive cash flow?

9. Working Capital Requirements
 In general, a startup with greater or expanding
working capital requirements is not as valuable
as one with smaller working capital needs
 Short-term liquidity needs soak up available
funds
 ifless liquidity is needed, investment in the
startup is less risky and more attractive for the
investor

10. Conclusion
 Startups are valued at lower multiples than
mature companies for a number of reasons
 These reasons warrant a more creative approach
to business valuation
 This also creates greater variance in professional
valuations
 Startup owners should take steps to bolster
enterprise value in advance of exit
opportunities

11. Presented by:
Schwartz Heslin Group
Address: Or visit us on:
8 Airport Park Bvld.
Latham, NY 12110
Phone:
518-586-7733
Web:
www.shggroup.com