Ujwal Sutaria

How do I value a pre-revenue startup ? Last week we learnt the Comparables method of startup valuation but that was for startups which have revenue or some other metrics. There are a bunch of methodologies to value a Pre-revenue startup also. Some of the most popular ones are as below: 1) Venture Capital Method 2) Berkus 3) Scorecard 4) Risk Factor Summation I will start with the 1st and most popular one which most of the investors out there use - The Venture Capital method:    In this approach, the value of the startup is determined based on the amount of capital that has been invested in the company by venture capitalists, along with the expected return on that investment.    Some basic definitions - Terminal Value(TV) is the value at which the investor thinks they can exit the company Return Multiple (X) is the expected multiple of return on capital invested   Let’s take an example with some assumptions and see how this works. Terminal Value(TV) = $100M Return Multiple (X) = 20X   Post Money Valuation (A) = TV/X = $100M / 20 = $5M   Funding Round Size (B) = $1M   Pre Money Valuation (C) = A-B = $5M - $1M = $4M   Now we need to factor in the amount of stake dilution which can possibly happen from the round you invested in till the round of exit at $100M. Typically it takes 3-4 rounds at least to reach $100M of valuation.   Dilution (D) = 50% (let's assume 50% for the sake of simplification)   Entry Pre Money Valuation (E) = C*D = $4M *50% = $2M    Hence, you need to enter in at a $2M pre money valuation in this case to make your return multiple 20X by the time startup reaches $100M in valuation.   This method can be useful for providing a sense of the market's confidence in the company, but it may not reflect the company's true value if the venture capitalists have over- or under-valued the company. Also, it doesn’t take into consideration any aspects of the business like team, market, competition, moat, etc. I would love to share the excel for the VC method of valuation with you, please put your email id in the comment and you will receive a copy of it. Link to my last post on Comparables method of valuing a startup - https://lnkd.in/dKwe7Si3 Also, if you are curious to learn more about various valuation methodologies in detail or about Startup investing then I take a 8 session (4 weekend) live teaching online course which you can check out here - https://bit.ly/3AdVlDg TDV Partners #valuation #startups #founders #investors #angelinvesting #funding #venturecapital #finance #startupfinance #linkedincreators

You valued my startup at 15X revenue multiple? HOW? This is the biggest question which I come across from founders - how do I value their startup?   This is THE question which most founders are always looking to find an answer for. Upcoming and new budding angel investors also are on the lookout to figure out how to value the startup and whether they are paying the right price.   Startup companies are typically valued based on a variety of factors, including the size of the market they are addressing, the potential for growth, the quality of their management team and the potential for profitability. Other factors that may be considered include the company's intellectual property, the strength of its business model, and its potential for generating revenue. Valuing a startup is not an exact science, and different investors and analysts may have different methods and approaches for determining a company's worth.   While there are numerous different methodologies that can be used to value a startup company. One of the most widely used and common methodology is   Comparables method -   In this approach, the value of the startup is determined by comparing it to similar companies that have already been established in the market. If the market is new then one can compare itself to similar companies in nearest adjacent markets that have raised money at that stage with that metrics. This method can be useful for providing a rough estimate of the company's value, but there is a catch here. Most of the startups valuation data is not public and hence not available to a founder or an Angel Investor.  However, this data is collated by many investors through their own portfolio companies or sourcing it through their peer networks.   Today, I came across one such data set for US startups spanning the last 5 years and thought it would be helpful to share it with the Indian startup ecosystem.   I will write about a few other startup valuation methodologies soon. Link to 2nd post in this series- VC Method of Valuation - https://lnkd.in/dcwQxUMb TDV Partners #valuation #startups #founders #investors #angelinvesting #funding #venturecapital #finance #startupfinance #linkedincreators

Is India pricing itself out of its tourism boom?  A weekend getaway to Dubai or Georgia now costs less than a trip to Goa, Manali or Mumbai. What was once an affordable domestic travel experience is fast becoming a luxury and the reason goes beyond just overpriced hotels or ₹400 airport tea.  This is a real estate story. Over the past decade, Indian property prices have surged massively and tourism is feeling the ripple effects. Hotel rates are rising as owners try to recover massive investments. Restaurants, burdened with rents are hiking prices. Retailers are passing on their costs to consumers. As a result, luxury travel continues to grow but budget travel is getting squeezed out, making domestic tourism increasingly exclusive.  → Property prices in tourist hubs are 150% higher than in non-tourist areas. → Ayodhya has seen a 10x jump in just a few years.  → Bengaluru and Hyderabad have witnessed 90% appreciation since 2019. And with India’s real estate market projected to hit $1 trillion by 2030, this trend isn’t slowing down.  But within this challenge lies opportunity. Entrepreneurs who build affordable stay alternatives, tap into offbeat travel destinations, or innovate in transport infrastructure could be sitting on the next big growth wave. India’s tourism space is changing. Do you think it will make Indian tourism better or worse? TDV Partners #indiantourism #prices #economy