Startup Founders Need to Learn Basics of Valuation: Experts

THIRUVANANTHAPURAM:
Noting that companies have to look at valuation only after commercialization, a panel of angel investors at Huddle Global 2024 today urged startup founders to attend masterclasses on valuation which will help bust many myths about attracting investment in ventures.

Participating in a panel session on ‘How Angel Networks Select & Nurture Startups,’ they said founders have to be judicious in valuation stage and a masterclass will lead them to the right track.

Roy I Varghese, Kerala Angel Network (KAN) Investor & Managing Partner, Roy Varghese Associates, said in pre-revenue/revenue stage, startup founders need to look at valuation since at that stage they are going to concede a portion of their ownership.

“After the 1990’s, where linear business was a rage, technological disruption happened and businesses started growing exponentially. If you are still in a linear business, valuation in the initial stages is an easy finance. But if you are in an exponential business, then you require valuations,” Varghese observed.

According to him, traditionally valuations have been moving from asset liability model to cash flow models.

Varghese said partnerships or Limited Liability Partnerships (LLPs) will be difficult for an investor to make an exit and private limited company formation is advisable though the process of closure may take two to three years since one has to get clearance from tax department and so many other things.

The sixth edition of November 28-30 Huddle Global 2024 was organised by Kerala Startup Mission (KSUM).

Raveendranath Kamath, President, KAN, said startups must conserve what is the actual fund needed for ensuring smooth scale up and take right kind of debt.

“Angel investors will help them in the initial stages. They have to attain lot of innovations and growth in terms of infrastructure and all aspects of life,” he added.

Ajit Moopan, Angel, KAN, opined that valuation is also connected to self esteem of founders, who are eager to scale up their products.

Rajesh Nair, Investor, KAN, was the moderator of the session.

Another panel session on ‘‘ The Latest Transformations in Startup Banking & Business Payments: Progressive Impact on Startups’ was attended by Bhagath G, VP of Products, Karbon Card; and Saandeep Kumar Agarwal, Senior Vice President, Commercial Banking Group, Axis Bank Ltd.;

Mayuresh Raut, Managing Partner, SEA Funds, was the moderator.