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Determining the value of a crypto business: 3 approaches
BDC Consulting’s most important mission is to help clients optimize the value of their business. The question then becomes: how do you assess a company’s value correctly? In this article, we will talk about the key valuation methods and the main mistakes that startup founders make when using them.
Introduction
An accurate valuation of a business helps founders and investors make sound financial decisions: for example, whether to sell a share in a project, or to completely exit it, or whether to acquire a company. Regulators, too, need it to assess the risks; and financial forensic experts, to calculate the collateral value.
Crypto startups mainly use business valuation when negotiating with potential backers. Apart from a quality blockchain product, a company needs a financial model that will work under different market scenarios and can serve as a base for decision-making.
In addition to traditional equity fundraising, the crypto industry provides a unique opportunity to invest in tokens, whose legal status is still not clearly defined in many countries. This article centers on the former aspect — valuation for investments in equity. We will leave the topic of investment in tokens for a subsequent review.
