Startup companies Valuation

Understand the value of your startup to raise venture capital

What your business needs to grow

Startup Valuation Service

Business valuation is not a simple or accurate process for any company. Even with public companies, for example, that have years of operation and stable sales and profits, assumptions and estimates need to be made. But it is much more difficult to value a new company that has not demonstrated stable growth and that may be several years away from having sales or profits.

That said, if you’re looking to raise capital for your Startup, you need to determine what the value of the company is. Otherwise, you don’t know how much equity to offer in exchange for the raised capital.

It is extremely difficult to determine the exact value of a company in its early stages because its success or failure is uncertain. It is said that valuing a Startup is more of an art than a science and at Kraken Financial we are artists in the valuation of Startups and we use the appropriate methodologies for the valuation of your Startup according to its characteristics.

Many times, depending on the stage in which the company is, the word “value” must be given a very different meaning than usual.

At Kraken we seek to calculate and quantify the value of ideas, the technical knowledge, and the human potential of the team working in the Startup. In the end, every big company was once an idea in the minds of intelligent, hardworking, and persistent individuals.

Our methodology and virtual tools allow us to help you without affecting one of your most valuable assets: your time. Our work sessions are recorded and edited so you can access them at the time that suits you best and all deliverables are online so you have easy access to them.

Our expertise, network, and digital toolset allow us to make this process quick and easy for you.

What methods do you use?

Here are some of the methodologies we use:

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Berkus method

This method is easy to understand. Dave Berkus is a very successful and recognized investor. He has invested in more than 100 startups. He is the creator of this valuation method that sets key moments that give value to a startup.

Examples include an experienced management team, the solidity of the idea, strategic relationships, having a prototype created. This method is intended for companies that have not yet generated sales yet and part of the question: Can this startup reach US$20MM in sales in five years?

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Sum of Risk Factors

The idea is the same as in the Berkus method: try to give the company an initial value and adjust that value as the startup qualifies in certain factors that pose a risk. This method uses 12 factors to adjust it and has a way of qualifying the company, giving a specific weight to each.

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Scorecard Valuation

This is one of the preferred methods for the network of angel investors. The first step is to look for the average pre-money value of companies that are in the same region, business sector, and stage as the company we want to value.

Afterward, certain factors are compared with similar companies and given a rating that is based on 1 (100%) if it is equal to average and can be adjusted up or down as the case may be.

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Discounted flows

There is a basic principle in the valuation of companies: A company today is worth the cash flows that it will generate in the future discounted, to this day, at a rate that depends on the probability that those flows will actually be received.

The principle is very simple. If your startup is doing well, you’re going to make a certain amount of money each year. To find out how much the company is worth today, we looked at the odds of achieving sales goals to determine a discount rate. With it, we bring those flows to the present.

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Comparable Transactions

This method is a rule of three applied to your startup that attempts to determine a valuation value compared to other startups in the industry.

In most cases EBITDA (pre-interest utility, taxes, depreciation, and amortization), profit margins, or simply sales can be used as an indicator. These indicators appear in your company’s results statement. Although, in certain sectors, there are some key indicators such as active users (software) or registered patents (pharmaceutical) that would be better used.

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Kraken Method

At Kraken Financial we have developed a method to value startup companies. It has had great acceptance in the venture capital investor community for its simplicity and holistic approach.

We start from an analysis of the composition of income, expenses, investments, taxes, working capital, etc. of the company that we will be worth. Once we have modeled these premises we carry out a scenario simulation process to establish a statistical valuation range. Think of 5,000 scenarios.

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