Startup Company Valuation: The State of Art and Future Trends

  •  Damiano Montani    
  •  Daniele Gervasio    
  •  Andrea Pulcini    


The aim of this conceptual article is to present a systematic literature review about the most used and innovative startup valuation methods to define the state of art and future trends on this important topic.

Because of the particular features of early-stage companies, it is not easy to find an adequate method to assess their value. Traditional valuation methods are unsuitable for startups. Therefore, over time, academic literature and experienced investors created alternative and innovative valuation models. We analysed the main models, outlining the advantages and limits for each one.

The results of our analysis show that there is currently no "perfect" method to assess a startup’s value. Each model discussed has significant limits, and the possibilities for improvement are many. We are witnessing a gradual withdrawal from more arbitrary valuation models, and consciousness is growing towards the idea that to better assess startup’s value, it is necessary to consider three aspects: attention to future forecasts instead of past data, using probability to consider different scenarios, and understanding of and attention to the specific business model of the startup rather than data on comparable companies in the market. Currently, none of the discussed methods integrates these three features harmoniously.

We expect that in the near future, the academic literature will develop new valuation methods (or will perfect existing ones) that should consider the three characteristics mentioned previously. In this way, it would be possible to create a more suitable method to assess a startup's value, i.e., a method to reduce uncertainty and that better represents the startup’s value and makes startup company valuation more reliable.

This work is licensed under a Creative Commons Attribution 4.0 License.