Startup Valuation

How to Value a Startup in 6 Easy Steps

You value a startup in 6 steps:

  1. Estimate the startup’s cash flow
  2. Calculate the cash balance
  3. Calculate the investment
  4. Calculate the free cash flow to equity
  5. Estimate the investor’s internal rate of return
  6. Calculate the present value

Then you can calculate the investor’s equity stake.

Startup Valuation

4/6 Calculate the Free Cash Flow to Equity

Assume any positive cash balance is payed out as dividend.

This results in the free cash flow to equity (FCFE).