The science of startup valuation

When it comes to evaluating a company, there are two factors to consider: potential and ambition.

A startup’s potential is assessed using qualitative approaches such as a scorecard and a checklist. These components consider everything from the founders themselves to the strength of their intellectual property and the market in which they operate.

What is the rate of growth in the industry? What is the startup survival rate in the region? These provide insight into the startup’s theoretical capability, which is critical because discussing future expectations with investors requires first agreeing on the present.

Later on, the emphasis changes from qualitative to quantitative measures. The two sides of value might then be conceived of as “assets and expectations” rather than “potential and ambition.”

Consider valuation in terms of baking. If you want to make the best slice of bread on the market, you must ensure that your components are of the highest quality and that your technique and timing are accurate. One is qualitative, while the other is quantitative. Both are scientific when approached correctly. Most importantly, they are repeatable, reliable, and reasonable.

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