Market capitalization. Times revenue method. Earnings multiplier. Discounted cash flow method. Book value. Liquidation value.
These might not mean much to you, however, maybe they should…
All of the above are methods that investors and businesses use to calculate a company’s valuation.
That said, the sheer volume of methods goes a long way toward explaining the inherent disagreements that exist from the process.
Often times, startups and angel investors will have drastically different valuations – understandable given one side’s optimism and the other’s practicality.
At the end, the final valuation likely falls somewhere between those two numbers.
However, this all goes to underscore the potential value of a unified, objective standard for determining a company’s valuation.
And it turns out one startup developed just that.
Cyndx, an AI-driven deal origination platform that aims to make capital raising easier for both investors and companies, recently unveiled Valer, a new AI offshoot that allows users to generate data-informed valuations in a matter of minutes.
In doing so, this startup may have transformed this process from subjective to objective.
After inputting financials, selecting comparable companies, and choosing parameters, Valer generates a report that uses all of those previously mentioned methods in concert to create a more trustworthy, quantitative-driven valuation.
“Valer helps startups overcome one of the biggest financial challenges – accessing real time, accurate valuations in a timely manner,” Cyndx founder and CEO James McVeigh wrote in the company’s press release. “In an unpredictable market environment like we have today, it’s more important than ever for startups to have access to resources like Valer to help them navigate the critical financial decisions that can make or break their future success.”
This represents a perfect example of the power of startups using technology to transform their given industries. By introducing solutions of this ilk, they are adding tangible value to extremely large markets – and seizing increased revenues moving forward.
Meanwhile, the world of angel investing benefits from increased reliability of valuations, and the number of companies seeking to raise on inflated, mirage-like valuations should fall in turn.
At the end of the day, this serves as both a reminder of startups’ ability to introduce necessary products and services – and a newsflash to investors that more reliable means of determining valuations are soon to be accessible.
And those are two things we will always get behind.