Features of valuation of startup companies

Abstract

The purpose of the article is to determine which of the methods of valuation are the most suitable for objective assessment of startups – newly created enterprises with no operating history and profits. The method of critical analysis of scientific and methodological literature is used. The methods of valuation of startup companies offered by well-known experts in the field of business valuation are summarized and systematized. Valuating startup companies an appraiser should search for alternative methods of valuation. Given the fact that there is no perfect valuation methodology of a startup company, we can suggest that an appraiser should use different methods of valuation (or a combination of them) to arrive at the right conclusion. Using several methods of valuation of startups you can come to the average value which may be closer to reality because all the alternative startup valuation methods are based on predictions and probabilities. To assess the value of a startup company that do not yet have profits, it is the most appropriate to use such methods as: the Berkus Method, Risk Factor Summation Method, Scorecard Valuation Method (Bill Payne Method), First Chicago Method, Venture Capital Method. When a company gives a stable profit it is more correct to use traditional methods of business valuation. The article substantiates the inexpediency of classical methodological approaches and methods for assessing the value of startup companies. A generalization of classical and new methodological approaches and methods of business valuation for startup companies is conducted. The prospects of further studies are determined: searching of the most acceptable methods of estimation of value of startup companies depending on the stage of the life cycle of a company and a sector in which it operates.