Or is it £55 million? Or $65 million? That depends on whether you’re an entrepreneur looking for to give away equity in return for investment, or an investor trying to leverage the best deal.
At least that’s the impression that TV shows like Dragons’ Den can create.
For entrepreneurs, putting a price on their companies is a crucial task that affects how much money they want to raise from investors, but it can be time consuming, costly, and for early stagers, very difficult to do.
This issue has been magnified several fold by the emergence of equity crowdfunding, where it has proved difficult for all parties involved to estimate the future earnings and therefore determine what share an investor should get. The result has often been outlandish over-valuations.
Now a Dutch firm Equidam claims to have put an end to the uncertainty and confusion with its cloud-based company valuation platform.
The company was founded by entrepreneurs Daniel Faloppa and Gianluca Valentini, both from Italy, who met while studying in Rotterdam. Both also have backgrounds in finance and economics and have experience of a questionable company valuation process.
Valentini says: “I have assisted with several valuation processes,where the argument for the share price was simply not backed up by a sound argument.”
Launched a year ago, the Rotterdam-based business has just closed a second seed funding round of its own, €225,000, led by a syndicate of Dutch angel investors.
“For early stage companies, the emphasis is on the qualitative data,” says Valentini. “That provides an overall picture of the business and its team, which is very important to its success.”Users of the platform software, which is driven by an algorithm developed from crowd funding data, complete a detailed questionnaire, covering everything from market size and business model, to their use of funds and the experience of their founding team, and this data is used to create the valuation report.
Equidam also cuts the time it takes for a valuation and makes the process less expensive for cash-strapped business founders.
“Typically, a business owner would have to go to an accountant or an auditor to get an appraisal of their company. That takes time and a lot of money. In the Netherlands, it could be as much as €10,000 ($13,000). To use Equidam, entrepreneurs pay just €320 ($414),” says Valentini.
Since last August, more than 1,700 entrepreneurs have used the valuation platform.
With the latest funding in place the company is focused on strengthening its role in the equity crowdfunding sector, from where it secured its own seed funding of €60,000, and where it sees valuation technology as playing a key role in future growth of the sector.
Equidam is already collaborating with a number of European platforms, including Symbid and InvesteerLokaal as will be working with Innovestment,C-Crowd and Seedups Canada. Its ambitious expansion plans also include the US market.
Rotterdam’s start-up and crowd funding base is developing rapidly – Symbid and InvesteerLokaal are both based in the city – and to accommodate its own growth plans, Equidam recently relocated to the Erasmus Center for Entrepreneurship, from where the new Rotterdam Hub is expected to emerge.
“To our knowledge, there is no other similar cloud-based valuation platform out there. We are considered a niche market, but one with a latent demand, and huge scope for growth,” adds Valentini.