Publicación:

The Life Cycle in Startup Valuation

Resumen

The business valuation process begins with the projection of the company’s sales or income, so it is important to establish how they will evolve over time. It is possible to verify that the businesses follow a common pattern in the evolution of their income, and these have a trend line in the form of an S inclined forward, defining the life cycle of the business. When new companies (startups) are valued, it is important to visualize their life cycle, since it usually takes time for them to generate profits or positive cash flows, therefore the investment stage and the moment where they prove their viability are prolonged. If these startups correspond to businesses based on the intensive use of technologies, their life cycles show an even greater trend in the duration of the investment stage, the introduction stage is slow, but if they managed to be successful ventures, they have rapid growth and their largest dimensions market, until reaching the stage of maturity. However, not all technological businesses are similar, so for the analysis the type of innovation with which the business worked must be considered, since the shape of the life cycle will be different in the investment period, the speed of growth and the size of the market.