I came across this simple visual on the different methods for valuing start-up firms, and found that it does not follow a set format. Of the five methodologies, only one is based on DCF, a second is based on industry multiples, and the other three are focused on a scorecard.
Should it be surprising that when assessing start-up companies, the focus is not on cash flow projections but on a narrative based on rankings? There is no clear idea for how to handicap or calculate risk, so there is a focus on creating characteristic rankings to form an overall ranking of potential success.
When faced with uncertainty, other methods of analysis are needed to form a risk assessment. In this case, factor scorecards have been developed to solve the problem.
No comments:
Post a Comment