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Q: How to estimate the company's value, based on what "IPO multiple" ? ( No Answer,   2 Comments )
Question  
Subject: How to estimate the company's value, based on what "IPO multiple" ?
Category: Business and Money
Asked by: go2china-ga
List Price: $25.00
Posted: 20 Nov 2005 05:54 PST
Expires: 20 Dec 2005 05:54 PST
Question ID: 595406
I am running a web-site. The principle of the site is that random
surfers publish their content on our platform (like Wikipedia.org),
all visitors could read the content for free and we gain profit from
PCP advertising (Google Adsense).

How should i measure the company's value, by which "IPO multiple" ?
Answer  
There is no answer at this time.

Comments  
Subject: Re: How to estimate the company's value, based on what "IPO multiple" ?
From: donroccos-ga on 22 Nov 2005 07:15 PST
 
There are several valuatio tools that can assist you in your task.
Youn could use comparables, which means that you compare your company
with one with similar attributes, and apply the same multiples for
your company.

The value of any assets is the present value of the future cash flows
from that assets. With this in mind, you can project the future
cashflows the next 7 years, and then discount it back at an
appropriate discount rate, and also add a terminal value number to the
sum. This is known as the DCF approach. However, it is hard to use for
technology companies, as revenue is often scarse in a starup period.

Hope this helps.
Subject: Re: How to estimate the company's value, based on what "IPO multiple" ?
From: cycinertia-ga on 26 Nov 2005 22:58 PST
 
Adding onto don's comments:

tech firms are extremely hard in term of valuation due to several reasons

1. their ideas are generally very new and innovative, thus hard to
find similar companies for comparables.
2. the firm's business model, if it has one, tends to be very
back-loaded, meaning the firm will take on a large negative cash
flow/investment before generating a product that will achieve eventual
break-even and profit, thus the DCF (discount cash flow) method does
not help since there would be little or no positive cash flow.

Does your firm have previous rounds of financing to base the valuation
on? If not, you must come up with a semi-plausible financial
projection possibly beyond the seven years suggested by don in order
to estimate the current value of the company base on possible future
growth and profits.

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