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The five-year-old ride-sharing app, Uber, is valued at US$40-billion while the three-year-old photo messaging app, SnapChat, is worth an estimated US$10-billion. The latter only recently started introducing some revenue-making features and was worth billions to Facebook last year. How do startups determine their value? Especially when they don’t have a regular income.
In this insightful podcast, simply called StartUp, renowned radio journalist Alex Blumberg and business partner Matt Leiber share their first-hand experiences on how to value a startup.
Each episode of the “podcast startup documenting the launch of a startup” Gimlet Media takes listeners through the company’s growth pains and gains. In this sixth edition, Blumberg and Leiber receive interest from investors while others question the company’s valuation.
The Inception-like StartUp podcast is really worth your 30 minutes if your interested in getting insightful lessons about building a company and learning about the exciting ecosystem:
While coming up with an accurate valuation for existing companies is rather simple (comparing expenditure and revenue), a developing company such as Gimlet Media is quite a different story. Blumberg points out that it boils down to a startup’s valuation cap, which is quite a big deal: “If I invest a US$100 000 — and the company I’m investing in is valued at US$200 000 — I’ve just bought myself half the company.” On the other hand, “If the company is valued at US$1-million, then my US$100 000 buys me far less — 0.1% of the company.”
Another important point Blumberg makes is that the valuation of your startup ultimately tells a bullish story to investors. “A US$10-million evaluation says that [our startup] is going to grow quickly, and that in a year or two when we have actual listeners, actual math and actual revenue, we’ll be worth twice as much.”