Demystifying Startup Valuation: A Founder's Guide

The Art and Science of Valuation

Valuing a startup, especially in the early stages, is as much art as it is science. While traditional metrics like EBITDA might not apply, other methods come into play.

Common Methods

• Discounted Cash Flow (DCF): Projects future cash flows and discounts them to present value. Best for startups with predictable revenue.
• Berkus Method: Assigns value to qualitative factors like the idea, prototype, team, and strategic relationships. Ideal for pre-revenue startups.

Angel Tax Implications

With the recent changes in Angel Tax provisions (Section 56(2)(viib)), obtaining a merchant banker valuation report has become indispensable for raising capital from domestic investors.