Valuation Methods and Tools

Valuation lies at the the intersection of strategy and finance. For many technologists and entrepreneurs without a background in the particular and peculiar vernacular of finance, valuation can seem strange, with its own language, manners and people who dress in suits - even when they do not wear them.

This cultural aversion, is however misplaced. Instead, valuation should be understood as a language for articulating business value to stakeholders. It is important to understand valuation as it relates to raising capital,making decisions about growth vs profitability, interpreting term sheets, planning acquisitions, developing business partnerships, defining exit strategies, or determining employee compensation.

This article from McKinsey provides a useful primer on valuation and especially Discounted Cash Flow (DCF) analysis.

Here at somatisch.io, we partner with Equidam to help companies understand and articulate their valuations, and provide them access to CFO functions and skills that are often hard to find.

Understanding valuation is an important skill to develop, and one that should be embraced as part of the varied skill set of an entrepreneur.