What is our startup worth?
Last year myself and two other partners got together to work on our startup. We got an offer from one of the investors for 40K seed money. We turned down the offer because one of the founder was expecting a baby 2 months later and one founder was in process of re-location.
Fast-forwarding to today, we kept on working on the idea and bootstrapped it. We all are making 100K plus salaries so did not feel the need to quit our jobs for 40K.
We are at the stage where we now think that it is better to spin off the startup as we can no longer contribute our time to it due to personal commitments.
What do you think something is worth which had 40K seed offer and has a working product?
Note: we have not launched the application yet to public. It was only shared with Friends and family and few investors and got good feedback.
Advisors Ecommerce Technology Selling Business
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In my experience the valuation of the business is based on its earnings. Since you have none you'd have to evaluate potential forward earnings and hope that someone agrees with you on that. – Karlson 12 years ago
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Earnings is not required to determine a valuation, I tried to draw a simple illustration here: http://blog.foundrs.com/2011/10/27/how-to-compute-the-valuation-of-your-startup/ What is more important in the question is that it looks like the founders want to quit, and that's a pretty strong indicator that the valuation is close to $0. – Alain Raynaud 12 years ago
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I'd value it at $0. 3 founders are all out - what could possibly be attractive about the company? – Tim J 12 years ago
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I agree. No founders, no clients. Most people want to buy a company when they start to have momentum and their growth is about to go exponential. Without any clients or sales momentum - all you have is your IP/code and with 0 founders very few people will want that. Best think you can do is find a competitor in the industry or market you are trying to serve that has a team of developers and sales people and see if they want to buy it. It probably wouldn't be worth all that much to them, but it's your best shot. – Ryan Doom 12 years ago
2 Answers
Your start-up is worth approximately nothing.
Since you haven't launched and don't have any customers, all you have is an idea and some coding. The code is only worth something to implement the idea. Ideas are ten a penny.
The 40K investment offer was an investment in you and the potential you had in taking that idea to market. That value doesn't stay if you leave. The fact you don't want to peruse the venture any further would be a huge warning light to any potential buyers.
The offer was for 40k in seed funding but in exchange for what?
If for 10% of the company that would value the company at a certain amount. However, that value is relatively meaningless without people to run the company most of the time.
The COCA(Cost of customer acquisition) and the LTV (Life time value) of the customer are good figures to have in your mind to really assess the value.
Valuation is all based on individual perception, if exit is your strategy then to you it's worth whatever you'd be willing to sell it for. To someone positioned to sell the product easily it could be worth much more, or less.
