How Startup Valuation Software Can Help Founders Make Informed Decisions?
Startup valuation software has emerged as an indispensable tool for founders and investors to negotiate valuations in fundraising rounds. Other applications of this tool also include issuing equity compensations while maintaining tax compliance.
However, today, we would like to examine how valuation software can help you make informed decisions. We will explore the use of this tool in strategic planning, investor relations and reporting, and M&A negotiations. We will also discuss how you can uncover the impact of market dynamics on your startup.
Toward the end, we have included a demonstration of these use cases.
Read on to know more!
How to use startup valuation software to make informed decisions?
The most obvious application of startup valuation software is fundraising negotiations. However, the utility of valuation software is not limited to just that. You can also use valuation software to issue equity compensations, create strategies for growth, plan for mergers and acquisitions (M&As), and report financial performance to investors.
We will explore all these use cases of startup valuation software in this section.
Fundraising negotiations
Eqvista’s valuation software allows you to calculate your startup’s valuation based on the discounted cash flow method, scorecard method, risk factor method, Berkus method, and venture capital (VC) method. All of these methods are commonly used in startup fundraising. So, you can use Eqvista’s valuation software to figure out the possible valuations you could be offered in fundraising rounds.
Our valuation software takes a questionnaire approach. By experimenting with your responses to questions related to business, management, product, market, and sales and marketing, you can understand what impacts your valuation most. Such experimentation is also useful in understanding how differences in assumptions made by you and potential investors affect valuations.
Eqvista’s valuation software also includes a round modeling feature that allows for swift simulation of different dilution scenarios. These simulations can be shared with incoming investors and investors who will stay after the fundraising round to provide clarity.
Software valuations
The valuation of tech companies often depends on their proprietary software. Also, some companies are involved in the development and transfer of software. For such companies, knowing the value of their software is necessary. This is where Eqvista’s valuation software comes in. We offer a software valuation solution that completes its task based on a questionnaire comprising 23 multiple-choice questions.
Through these questions, our valuation software learns important facts like:
- How important is the software to your company’s operations?
- How complex is the software?
- What are the hardware and maintenance requirements for this software?
- What is the skill level of people involved in building and maintaining the software?
- What is the annual turnover of key programming personnel?
- What is the standard development time required for the project?
- Is the software scalable?
Equity compensation
Eqvista’s valuation software goes beyond just supporting fundraising operations. We understand that companies require business valuations for tax compliance purposes when they issue equity-based compensation. Equity-based compensation is a useful means to attract and retain employees at the top level.
Hence, we cover 409A valuations and HMRC valuations in our valuation software. So, companies in the US and the UK can issue equity-based compensation with peace of mind if they use Eqvista’s valuation software. Our team of legal and taxation experts is constantly analyzing any new tax regulations to ensure that you get audit-ready valuations.
We also offer equity and tax advisory services to help you understand the implications of certain valuations and of issuing various kinds of equity interests.
Strategic planning and growth
Eqvista’s valuation software generates accurate projections of your financial performance within seconds based on the data you input. You can either manually fill in all the required data or use the Projection Smartfill feature that automatically calculates projections. You must input details like company stage, starting revenue, earnings before interest, tax, depreciation and amortization (EBITDA), rate of return, expected revenue growth, and terminal revenue growth.
Based on this data, we will generate future projections of your revenue, profits, and company valuations. These projections can help you assess the effects of your current business practices on your company’s valuation and growth potential. Knowing these projections creates a data-backed perspective for setting realistic milestones and growth targets.
Investors can use these projections in planning their exits. These projections will help them simulate the financial outcome of exiting in the next liquidity event like initial public offerings (IPOs) or mergers and acquisitions (M&A).
You can use our valuation reports as a basis for comparing your startup’s performance against your peers. This will help you identify areas for improvement and your sources of competitive advantage.
Mergers and acquisitions (M&A)
If you are considering selling your startup or merging it with another company, Eqvista’s valuation software can provide crucial insights. If you plan to stay invested post-merger, you will need to negotiate your stake. The valuations our software generates can prove helpful in these negotiations.
If you plan on exiting, our valuations can help you negotiate your compensation. Similarly, we can also help you negotiate your compensation in case of acquisitions.
In such negotiations, unbiased valuations from an unrelated but qualified third party like Eqvista hold a lot of weight.
Investor relations and reporting
Your investors may ask for valuation updates periodically or when important events unfold. Since Eqvista’s valuation software offers unlimited valuations at Premium as well as Basic plans, you can cost-effectively meet such investor needs. We enable you to edit and re-run the valuation report as many times as needed.
To make the valuations easy to share, we have enabled PDF downloads. If you subscribe to our premium plan, you can also download the report in Excel format.
Understanding market dynamics
Eqvista’s valuation software can help you assess the effects of changes in market conditions and industry-wide changes. Our users can run unlimited valuations and we store valuation records for ease of access. Every time you run a valuation report, we will incorporate real-time market data and economic indicators. By generating valuation reports as and when market conditions change, you can assess their impact on your startup’s valuation.
Power of Eqvista’s valuation software!
Storyline:
- Early-stage startup needs a valuation for initial funding. Calculate value using scorecard or Berkus method on Eqvista’s valuation software.
- The startup reaches a stage where it must on-board new employees at the top level. It plans to attract employees with stock options. Highlight the ease of 409A valuations with Eqvista.
- Investors require regular reports in light of changing market dynamics. Highlight the ease of generating new valuation reports based on real-time market and macroeconomic data with Eqvista.
- The company creates proprietary software critical to its operations. Show how Eqvista’s valuation software assesses the value of this software.
- The company is about to be acquired by a larger corporation. Once again, highlight the ease of using Eqvista’s valuation software to negotiate post-M&A stake or compensation.
Supercharge your business decisions with Eqvista’s insights!
Since valuation software generates valuations without human intervention, it can generate the most unbiased valuation reports. Such reports are valuable in fundraising negotiations, negotiating post-M&A compensation or stake, and reporting performance to investors.
You can also assess the impact of your business decisions and management practices through valuation software. Furthermore, since valuation software takes real-time data as input, it can help you gauge the impact of changes in market conditions. Such insights are valuable in forming growth strategies.
Valuation software also makes it easy for you to issue equity compensation in a tax-compliant manner.
Later in the article, we saw how Eqvista’s valuation software can help founders save time in getting accurate valuation insights for various purposes. If this demonstration piqued your interest, reach out to our team.
