Setting An Equity Value For Your Start-Up

Setting An Equity Value For Your Start-Up

Suggestions From A Professional Business Plan Writing Service

One of the biggest challenges for the management of early stage companies is setting a realistic Equity Value for their company.

There is popular TV show airing on ABC called ‘Shark Tank’ that exemplifies this conundrum for entrepreneurs. On the show a panel of self-made tycoons grille founders of early stage companies as to why they should invest in these new ventures. Almost every entrepreneur gets stuck on valuation.

In a nutshell:

What counts

1. How much revenue has the company made. ( Has anyone bought anything ?)
2. How much cash have the founders put in.
3. Do you have market controlling patents?
4. How do you compare to the competition?
5. What percent of the market can you reasonably capture and hold?
6. What is your profit margin?
7. Has any of the management been successful with a start-up before?
8. Does the public know your product exist? ( How will they find out?)

What Doesn’t Count

1. We’ve worked on this for 9 years! (We don’t care)
2. My family ran a grocery store in Queens, NY! (But this is an Enterprise Software company)
3. There is no real competition! ( You are delusional and could probably beat Venus Williams at tennis and Michael Jordan in a 1-on-1 B-ball game)
4. I’ve worked in this field for 15 years; no one else could do this. ( See #3)
5. We have a team of experts! (Who are all working real jobs for other companies.)
6. This is a $10 Billion market and we will be making $100 million by year three. (If this was true, AT&T, Google or Pfizer are WAY ahead of you.)
7. We don’t want to loose control of the company. (If you don’t get the business rolling and generating value, what is there to loose?)

In short, be humble, keep it real and do anything legal to get the capital that will help you build a successful business.

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