While a start-up may be funded by ideas, it still needs to know its value to be in the marketplace and make progress. So, what happens next?
A valuation is simply an estimation of the value of a company and it is often based on assumptions about its full potential. Though it is not an exact science, a company’s valuation is important because it can determine the percentage of the company that should be given to an investor in exchange for cash.
Your first 18 months is crucial. You have to run at least three experiments in order to demonstrate your potential for growth. That is what investors would want to see when you offer them shares in your company.
In the creative and technology industry, this is even more crucial. How can you possibly showcase your real talent within 18 months? This is when you have no nights to spare for sleep. It is the mandatory struggle in the beginning.
Not only do you have to showcase your potential, you would also need to be outstanding. Just so you know, you are not the only one in this world. How can you surpass your competitors? What makes you special and really worth the money?
That is roughly how you evaluate your company’s worth. In this industry, having more in-house expertise will help you quite a lot. This enables you to gain a higher net profit at a lower cost. If you keep doing work with a partner or continually need to outsource, this will reduce your profit margin and the valuation too.
Once you get a good grip on the valuation of your company, you will become the leader. Other startups will begin to look up to you and track what you have done in the past.
Now that this has become an interesting topic for all the founders out there, allow me to provide you with the source of a company valuation. All you have to do is click here.
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