value so this statement is sort of true and that the long-term profit margins will affect the terminal value but really most of it’s gonna come down to the multiple or the long-term growth rate so the truth about start valuations summed up pretty well by this quote if a company has a one-percent chance of being a hundred billion dollar company then it’s.
worth about a billion dollars quotes from Paul bite the creator of gmail now a partner at Y Combination this guy knows what he’s talking about when it comes to startups so I think there’s lot of truth to this quote so in short how are startups worth billions of dollars they’re worth that much if they go from zero in revenue to a lot of revenue and cash flow very quickly in the near future this type of evaluation is dependent on incredibly high growth rate assumption sand a big turnaround in margins as a company goes from losing money to suddenly making a lot of money so the discount rate has to be very high to account for this this scenario does make sense according to evaluation.
principles but only if you’re willing to accept a lot of risk and also only if you’re relatively well diversified if you just invest in one startup forget it you’re going to lose all your money so you have to have a pretty well diversified portfolio for the step evaluation and the step of strategy to ever make much sense How to Value a Company in Easy Steps, How to Value a Business- Valuing a Business Valuation Methods Capital Budgeting Welcome back to our second part of Capital Budgeting, which is Valuing a Business.
Brought to you by Before this video, you should first understand present value,net present value, basic capital budgeting, and the weighted average cost of capital,or the WACK. If you don’t understand these concepts yet, I recommend that you watch my other free videos on these topics above. Let’s get down to it!