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The excel valuation here illustrates the basic steps to the calculation of value for a small early-stage growing business, including:
– the calculation of the discount rate (in this case an alternative approach to CSRP calculation is used)
– the Discounted Cash Flows (in this case the Net Equity Method is used instead of the WACC, which in the absence of debt results in the same value)
– the Market Approach, which in this case includes mostly exits
– The Valuation Summary

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Depending on the circumstances and characteristics of the company and transaction, the Cost method can also be used, and different versions of the Income and Market Approach can apply.

Additionally some transaction-specific features, such as the calculation of synergies, sometimes are added. Additionally, the Valuation Engagement would include more advanced methods to calculate the discount rate and the terminal value, among other features.

Prevalent valuation methods can be applied to startups as well, but with a variety of adjustments that are necessary to illustrate the different features.


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We calculate the discount rate for SMEs and later-stage companies through the CAPM approach, assessing systematic and unsystematic market risks, beta for the sector, changing debt levels, additional debt risks and additional market risk premiums. In some circumstances, an alternative beta calculation method is used for high-risk companies. The discount rate is adapted to the method chosen to discount the cash flows (WACC, Net method, APV). For early-stage investments, we would use a different approach based on investment returns. The same applies to larger companies and corporations, for which a very detailed Discount Rate and risk assessment takes place.

For startups, the calculation of a discount rate is rather different, as it is stage-specific and it reflects more the expected return on investment of early-stage funds and high failure rate of startups than other observable market risks and returns. The higher discount rate of startups is also a sign of inflated financial projections as startups strive to sell themselves as potential unicorns. The discount rate in this case is only applied to the exit value, or used as an adjusted multiplier.

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The Discounted Cash Flow is based on carefully planned projections. The terminal value is extremely important and therefore sustainable figured are calculated based on future market changes, the company’s strategy, potential reinvestments, and a realistic growth rate. Different income methods can be applied here (WACC, Net method, APV), based on the capital structure of the company. Additionally, the valuation would include a detailed analysis of non-operating assets and net debt, as well as bespoke discounting techniques based on the timing of cash flows.

While a cash flow statement is very useful for startups, discounting cash flows is less useful, particularly at very early-stages. Investors only earn from a liquidity event such as an exit and IPO, and therefore discounting cash flows would be less suitable. Also, the focus for startups is on growth rather than profits, with likely multiple rounds of funds and any excess cash flows reinvested into the business, rather than paid out as dividends, and any spare capacity will be used to further scale the company and maximise the exit. However, a DCF can also take place for a startup if a number of adjustments are applied (which we will review in a later post).

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The Market Approach can be applied on current figures based on the foreseeable transaction (prospective exit), or on future figures when the market value of the company can be set as the terminal value (for startups or companies that are not likely to be sold in the near future). This leads to different approaches. When using the market approach, we choose transactions very carefully, using CoTrans (acquisitions), the Guideline Company Method (comparable stock-listed companies) or Equity Financing Transactions, depending on the stage and specific features of the company. When information is available, we also adapt the multiples to the company’s capital structure. Only reliable multiples will be used, as well as non-conventional multiples that are sector-specific, which provide very useful information for early-stage companies.

The market approach takes place in a similar fashion for startups. However, the type of transactions considered should be more similar to the startup in question (at exit time). This means that both startup acquisitions, late stage funding and startup IPOs can be considered. Data here is more scarce, and business model comparability is more important. A variety of sector-specific multiples can also replace the lack of other financials for startups. Additionally, for startups, a variety of seed stage methods are available for startups, which we have updated to current market trends.

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For early-stage startups, the market approach is applied to calculate the future exit rather than the current market value. To substitute this, other seed stage methods can be applied, and rounds of funding at the same stage of comparable companies can be researched to calculate the current market value (after adjusting for differences in comparability).


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The Valuation Summary provides a quick overview of the methods used, and the main valuation inputs and outputs. When the company generates revenue, the income approach (DCF) is the preferred method used, while the market method will be used as comparison, but we ensure that both results are consistent with the company’s strategy. The cost method or other startup-related methods will be used for different types of companies.

For startups, we are likely to compare or average different methods used, and then adjust for potential dilution and other factors. The stake of the funds to raise is calculated based on this. The ROI and Cap table are also displayed in out startup valuations.

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