Gauge the Right Valuation of Your Company Before Fundraising

In the process, it is of prime importance for the company to play smartly and compute valuation accurately.
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

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  • Jun 13,2019
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  • 11 Mins Read

In an entrepreneurial trajectory ensuring a steady growth of business is essential. Revenue and profit are vital to keeping a business afloat and thus, business owners employ various methods to make the business financially sound. Amid all, fundraising is one of the beneficial ways to attain financial backing for the company.

Prior to carrying out fundraising, the company has to make a presence in the market; make loyal customers; add affluent industrialists to its network so that fundraising can become easy altogether. With the aforementioned vitalities, the company is able to present to a positive background, show business sustainability and, in turn, raise funds from investors.     

However, before starting the round of funding, there is another important thing that the company should perform – company valuation.

Estimate the Right Valuation of Company

In the fundraising process, a company demands a certain amount of money from investors and for that, it has to exhibit its company’s valuation. The valuation should be precise –  neither extremely high nor too low. Once the valuation is gauged and proclaimed, investors and private equity firms scrutinise the company’s offerings and keeping in mind their respective interests, make investments.

In this process, it is of prime importance for the company to play smartly and compute valuation accurately. Calibration of the company’s assets, liabilities and revenue should precise as only then the investor will be considered to fund the company.

1.Valuing the Company Below or upto $1 Million

A startup company, which establishes its footprint in the market and continues to rise, seeks funding at a point for business expansion. Such companies gain traction in the early stage and then, brings more professionals on board. After this, the next strategy involves increasing the business and for which, only profits are not sufficient. Thus, the company opts for financial backing from external sources for the first time; these kinds of companies are valued at around $1 million or less than that.

In May, a Bengaluru-based company, Skillenza, bagged $1 million in the funding round. The company mainly runs an app, which helps software firms to perform talent searches and at the same time, facilitates developers to ascertain jobs, according to a media report.  The success of the web application is considered a primary reason to grab investment offers from big investment companies.

  1. Valuing the Company Between $1- $3 Million

Companies, which receive funding from the initial stage, is unlikely to stumble in their course as they not only have financial backing but also receive mentorship at important times. As a result, such companies can value themselves between the range of $1 to $3 million. Angel investments are a crucial reason owing to which, a company’s valuation increases.

A Mumbai-based startup company, FreshVnF lately raised $2 million in the round of funding. The company runs a tech platform wherein it helps to transport fresh fruits and vegetables to cafes, hotels and restaurants directly by eliminating the mediator. The business is one of its kinds and thus, manages to allure investors.

Companies can value their businesses by considering assets and growth prospects they have. By reflecting on other elements of the business, companies can also gauge valuation of over $3 million and more. However, they need to showcase success rates and solidarity in their business.

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