Questions

Besides Equity Firms and Venture Capitalists, are there any companies that do Pre-Revenue Valuations?

2answers

Hi,

You typically do not need a pre-revenue valuation unless you have IP or real assets. Otherwise it is typically made up and totally nonsense.

This really comes down to motivation. I usually tell investors if you take more my incentive to do this goes away. I am putting my time in to this and I am expecting a certain return for it. If I do not get to do that return no one in the world will ever get to see this product because it just no longer makes sense for me to do this giving up more than 20% equity to an early stage investor.

There is also the question of, "what is your time worth?" when talking about early stage valuation"

Sincerely, Kevin Kane
www.claroveri.xyz


Answered 3 years ago

There are many consultants, brokers, appraisers and other experts who value businesses and cash flows. I do Most Probable Selling Price evaluations for my clients in most of the Western World.

The problem with a pre-revenue enterprise is that you'd be relying on projections.

Anyone who wants to buy a business is doing so because they wish to make money. This comes in one of two forms; cash flow from the subject business or savings because the subject business helps the acquirer save money.

Acquirers sometimes also consider synergies. For example: how much money could they make if they offered your product/service to their existing customer base.

The difficulty in the valuation process is deciding upon the reliability of the projections or trying to guess/estimate the savings or synergistic value to a potential acquirer who may not be known.

If you did want to hire a valuation specialist to create an opinion, it would likely have a stern warning to readers about the subjective nature of the input data.

Please arrange a call if you'd like to discuss your scenario and why you're looking for this type of expert.

David Barnett


Answered 3 years ago

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