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Valuation as a Process, Not Just a Number A common misconception is that startup valuation aims to pinpoint a single, definitive “right” number representing the company’s price. Comparable Transactions (as a Primary Method): This method, often referred to as “comps,” involves applying valuation multiples (e.g.,
10] , [23] , [2] Discount Rate: The rate used to discount future cash flows is typically the cost of equity, calculated via the Capital Asset Pricing Model (CAPM): Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium. [23]
In the context of startup valuation, “comparables” (often shortened to “comps”) refer to companies that are used as benchmarks to help estimate the value of the startup in question. Early-stage comps focus on potential, while later-stage comps incorporate more financial performance data.
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