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    1 Reply Latest reply on Nov 1, 2012 6:39 PM by Paraday_Comm

    How to Value a Start Up ?

    thesmarterbrain Newbie

      Hi all , im thinking of investing in 2 guys and an idea ,the business has not incorporated and there are as yet no cash flows .In the abscence of cashflow data my question is does anyone know of a formula to value the idea /the guys/the future potential .Thanks



        • Re: How to Value a Start Up ?
          Paraday_Comm Navigator

          Hi Sam~


          My first question is the company? You may want to look into some basic principle's around SEO, if that Website address will be used to sell those products and is the concept which you are investing.


          OK, with that said, moving forward:

          For start-ups, especially at the pre-revenue stage, valuation is more often a combination of team, size of target market, position compared to similar products & companies; and to some extent the exit opportunities.



          Good investors will want to fund the start-up with enough cash infusion for them to reach the next milestone (Profitability milestones or a new product launch for example) on a valuation that will not over-dilute the founders. At the end of the day, investors are mostly investing in the team in early stages, and it's only fair for founders to retain enough ownership and stay motivated for the long haul.


          An investment deal more than any other type of deals, must be executed as a "win-win" mainly because it's a long term relationship where investors & founders work together to grow the company and take it to the next stage.


          I hope this helps a bit Sam. If you & your new team require assistance with regard to on or offline advertising & marketing, I may be interested in working with you as an investment - depending on what your product or services end up being.


          All the Best,

          Jeff Reynolds

          Paraday Communications