Selling Your Startup

7Understanding Your Valuation

How much is your company worth? How will buyers be coming up with a valuation for your business?

If you pay attention to the stories promoted by media organizations, multibillion dollar exits may sound like the new normal. That is certainly a milestone to shoot for. Yet, in reality, as of this writing, the average exit price is still about $200 million. It is definitely nothing to be ashamed of if you are selling your company for millions.

You certainly don't want to undersell yourself, your company, or your investors and team. You don't want to sell yourself short of (potentially) billions of dollars. But you don't want to ask for far too much and have serious buyers dismiss you because they think you are being unrealistic.

You also probably have a legal responsibility to other shareholders. You need to be able to show them how valuations work, what is fair, and when they may be foolish—or even crazy—to turn down an offer.

So what is a startup worth?

The simple answer is this: whatever someone is willing to pay for it at any given time.

There is also an art to valuing startups. There are common mathematical equations others will apply to your business as well.

Variables Affecting Your Startup's Value

These are just some of the variables that can be used to calculate what your company may be worth and the offers you can expect and demand.

• Current market and economic conditions
• The company buying you
• The competition over acquiring your company ...