How do you calculate the right price for a young shoot? With little history, startups are often valued instinctively rather than on measurable factors. Early Metrics, the international rating agency for innovative start-ups and SMEs, wanted to demystify this process with its new white paper "Valuing Brilliance: a guide to fair startup valuation". This research is based on a database of 469 startups rated and monitored over two years. The agency also gathered the views of several players in the French startup ecosystem, including Bpifrance Le Hub, the early stage fund Elaia Partners and the startup Tilkee.
The book sheds light on how traditional valuation methods can be improved to best reflect the potential value of a startup in Seed or A-Series. For example, reducing the projection time to 5 years for DCF, using only positive metrics in the multiples method (sales or other), and measuring the risk of dilution in the VC approach are some of the adaptations that can make valuation more relevant to startups.
Early Metrics has also used its expertise and data to identify qualitative parameters that have a significant impact on the success of a fundraising campaign. On the one hand, the growth potential seems to be positively correlated with the result of the exercises, but it also shows that the sector in which the startup operates has an even greater influence on its success. Especially in high-tech sectors, such as MedTech, startups have limited short-term growth potential due to long research times, but this does not prevent them from raising. In addition, among more than 25 criteria analyzed, the agency was able to identify 5 variables that reliably predict the success or name of a fundraising campaign in Seed or Series A: