I have my startup going along nicely. It's a social app on mobile phones. Users start on boarding and using it. I have invested quite a lot of cash to get to this point. Say 100k for the sake of the discussion. The app doesn't bring any cash but has a great potential. I'm not worried about that at this point. If and when I will need investors what and how should invaluable the company? If it is based on income then zero. Based on potential then 3m $... How does that work this seems random and based on luck.. Thanks
You've received a lot of answers to this question already, but the short answer is that it is a long story! The easiest way for me to respond is to direct you to a blog entry I wrote on the topic, which spells out the most common methods of valuation and their typical applications: http://www.stantonlawfirmllc.com/2014/11/a-diamond-in-the-rough-how-should-i-value-my-business/
Let me know if you want to chat!