What Is The Scorecard Method For Startup Company Valuation?
The Scorecard Method for startup valuation is one of the methods used to calculate startup companies' value.
The Scorecard Method was developed by a business angel named Bill Payne, and it fits for startup valuations of companies in the pre-revenue stage. The Scorecard Method value the startup by comparing it to other similar young companies recently funded. The Scorecard Method focuses on fundamental aspects in assessing the startups' value, such as team management skills.
The Scorecard Method method has many weaknesses, such as great discretion used to assign a weight to different factors that determine the final startup value and find similar companies
The application of this method consists of three steps. The first phase is to establish the average pre-money valuation of pre-revenue companies operating in the same geographical area and the same business sector. The second phase is the comparison between the startup under assessment and comparable companies, concerning some specific variables, to which the Scorecard Method gives different weights (with a particular range) as indicated in the following table:
| Factors | Relative weight |
|---|---|
| Strength of the Management Team | 0-30% |
| Size of the Opportunity (scalability) | 0-25% |
| Product Technology | 0-15% |
| Competitive Environment | 0-10% |
| Marketing/Sales Channels/Partnerships | 0-10% |
| Need for Additional Investment | 0-5% |
| Other | 0-5% |
In the third step of the Scorecard Method, the final value of a target startup is calculated by multiplying the sum of factors with the average startup's value.
The Scorecard Method method has many weaknesses, such as great discretion used to assign a weight to different factors that determine the final startup value and find similar companies.
Conclusion
In this blog post, we have discussed the Scorecard Method For Startup Company Valuation. If you are looking for a quick and reliable way to evaluate the value of a startup - you are welcome to use Equitest. Start for Free by clicking here.
