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Valuation process

As explained in Tech Startup Toolkit

A valuation process is a methodology for estimating the monetary value of a company or other asset.

A valuation process estimates what a company is worth. In a priced round, a new lead investor sets the share price and valuation, often while competing investors submit term sheets. section 20.1.2

Investors may weigh:

  • Market quality, because a strong market can substantially increase value. section 20.1.2
  • Company stage, such as seed or Series A, which sets expected valuation ranges. section 20.1.2
  • Previous valuations, balancing follow-on expectations against competing offers and the possibility of a down round. section 20.1.2
  • Team strength and departures, including the CEO’s experience, market knowledge, sales ability, and explanations for key people leaving. section 20.1.2

The uncomfortable lesson

Two new investors compete to lead the next round and submit different term sheets. Their prices reflect subjective judgments about the market, stage, prior valuation, and team. Competition may push the valuation up; weak performance may produce a down round. section 20.1.2

How Tech Startup Toolkit covers it

How deep it goes
Defines the process and names several investor factors, but stops short of explaining a formal valuation model or calculation.
Examples
Uses competing investors, term sheets, strong markets, prior rounds, team departures, and down rounds as concrete illustrations.
What you can do after
Evaluate how investor competition and company-specific factors can move a startup’s financing valuation.
How it connects
Connects valuation process with priced rounds, term sheets, company stage, previous valuations, team assessment, and down rounds.
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This explainer was generated by Manning's knowledge graph from the text of Tech Startup Toolkit. The section links point to the parts of the book it draws on.