An Evaluation of the Startup Valuation Methods

Abstract

As societal interest and enthusiasm for venture capitals remains stable and strong currently, the valuation methods play a more and more important role in assisting the venture capitalists to make more informed investment decisions. Based on this background, this research will focus on two typical valuation methods. They are Discounted Cash Flow (DCF) Analysis and Venture Capital (VC) Method and the applicability and challenges of these two valuation methods in venture capital investment area will be explored. This paper will also offer both theoretical insights and practical applications to analyze these two approaches by using case studies and empirical figures. The final results of the research show that each method has its own advantages and limitations so that the choice of which method to select depends on the specifics of the startups being evaluated. Lastly, the paper will end a summary of the main points made about each of the approaches and an outlook for future research directions in venture capital valuation field.