Valuation of high-growth Companies Unicorn (finance)

1 valuation of high-growth companies

1.1 market sizing
1.2 estimation of finances
1.3 working present

valuation of high-growth companies

for high-growth companies looking highest valuations possible, comes down potential , opportunity. when investors of high-growth companies deciding on whether should invest in company or not, signs of home run make exponential returns on investment along right personality fits company. give such high valuations in funding rounds, venture capital firms have believe in vision of both entrepreneur , company whole. have believe in company can evolve unstable, uncertain present standing company can generate , sustain moderate growth in future.

market sizing

to judge potential future growth of company, there needs in-depth analysis of target market. when company or investor determines market size, there few steps need consider figure out how large market is:

defining sub-segment of market (no company can target 100% market share, known monopolization)
top-down market sizing
bottom-up analysis
competitor analysis

after market reasonably estimated, financial forecast can made based on size of market , how company thinks can grow in time period.

estimation of finances

to judge valuation of company after revenue forecast completed, forecast of operating margin, analysis of needed capital investments, , return on invested capital needs completed judge growth , potential return investors of company. assumptions of company can grow needs realistic, when trying venture capital firms give valuation company wants. venture capitalists know payout on investment not realized 5 ten years, , want make sure start financial forecasts realistic.

working present

with financial forecasts set, investors need know company should valued in present day. more established valuation methods become more relevant.

this includes 3 common valuation methods:

discounted cash flow analysis
market comparable method
comparable transactions

investors can derive final valuation these methods , amount of capital offer percentage of equity within company becomes final valuation startup. competitor financials , past transactions play important part when providing basis valuing startup , finding correct valuation these companies.