Metrics & Performance
Valuation Methodology
The analytical frameworks used to determine a company's worth, including DCF, comparable analysis, and precedent transactions.
Valuation methodology encompasses the frameworks investors use to assess company value. Main approaches include: comparable company analysis (market multiples), precedent transactions (M&A multiples), discounted cash flow (intrinsic value), and venture capital method (working backward from expected exit). Early-stage valuations rely more on qualitative factors and comparable analysis, while later stages use more quantitative methods.
In Practice
A Series B valuation uses multiple methods: comparable SaaS companies trade at 15x forward revenue ($15M × 15 = $225M), a DCF model suggests $200M, and the VC method (targeting 5x in 5 years, needing 20%) implies $250M. The final negotiated valuation is $230M.
Why It Matters
Understanding valuation methodologies helps founders negotiate more effectively and helps investors make disciplined decisions. No single method is perfect — the best valuations triangulate across approaches.
Related Concepts
Further Reading
What LPs Actually Care About When Investing in VC Funds
DPI vs TVPI, track record, team stability, differentiated access, fund size discipline—here's what limited partners actually evaluate when committing to a venture fund.
Building a Venture Capital Track Record From Zero
How emerging fund managers build a credible VC track record from scratch — angel investing strategies, attribution frameworks, and the path from first check to Fund I.
The Complete Guide to Startup Valuation Methods
How do investors decide what your startup is worth? A deep dive into every major valuation method from DCF to comparables to the VC method.
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