Is Valuing a Young Start-Up More Art or Science?

How do investors place a valuation on a start up business? Especially when the business is merely an idea in the minds of an entrepreneur.

Valuations are based on several details surrounding the business and its personnel, but main factors include the track record of the founding team, the size of the market opportunity and whether the business has already gained users or started generating revenue.

Usually, seed-stage investors have little to base their valuation on, so they often rely on a “spray-and-pray” approach – whereby they invest small amounts of investment into several start ups in the hope that one or two will make them a huge return.

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