How to evaluate startup's stocks?

[FunGuy]

Hi,

Let's say i will soon launch an online startup that is quite innovative. I need more capital from outside investors. Let's say 30k pounds. The question is ho

 

[FunGuy]

Hi,

Let's say i will soon launch an online startup that is quite innovative. I need more capital from outside investors. Let's say 30k pounds. The question is how can I evaluate what part in percentage of the companies stock I should give away to investors for that much of money? Now, it's a question if the company will be successful, but let's say if I will agree to give away 5% of the stocks and if my company will get off the ground and it's worth in the future (let's say) would be billions of pounds these 5% will be a lot of money.

Regards,

 

[KidsBeeHappy]

Your business is worth one of 2 things;
(1) What someone would pay for it now
(2) What it would cost someone else to get to the same point, with the same product, contracts, IP, and any other assets or business knowledge that you currently have now.

So your shares would be equivalent to the % valuation of that, flexed a little maybe for anyother skills or assets that they are bringing to the party, and for considerations regarding shareholdings/control etc that people might perhaps pay a premium for.

Potential has no value unless its secured or underwritten by something in (2). All it is otherwise is future effort, and that future effort's value will be measured at the point where the effort is made.

Does that make sense?

 

[FunGuy]

What about Google. Two guys had nothing at the beginning just a vision. And one angle investor gave him 100k dollars. And after this they were capable of getting money from investors without any profits. They even got 25 million dollars of investment without having any profits

 

[KidsBeeHappy]

What about Google. Two guys had nothing at the beginning just a vision. And one angle investor gave him 100k dollars. And after this they were capable of getting money from investors without any profits. They even got 25 million dollars of investment without having any profits

They had IP. The IP knowledge was the asset that had the value.

 

[Liybpg]

I think that potential does worth something. IP itself is still valued on a potential to deliver - it does not necessarily deliver now.

 

[akirk]

What is the business worth:
- value of assets
- value of cash in the bank
- value of confirmed order book
- value of IP if any (difficult to value, and this is where potential value may come in...)

reduce by xx% for risk factor

it is usually a lot less than the business owner thinks
what the business will be worth one day is irrelevant - yes, they may get a lot of money back for their small initial investment, but they are investing at a high risk time so this is simply the balance of risk / reward - the much much higher chance is that they will lose their money!

easy

Alasdair

 

[KidsBeeHappy]

Potential is only of value when there is an asset there that's capable of delivering it.
Otherwise we would all be wealthy happy people.