The Market Multiple Method

Perhaps the most popular approach to startup valuation, this model works on the assumption that similar assets sell at similar prices. For public stocks, a common example of this method is the price-toearnings (P/E) ratio.

Yet for startups, investors look at recent acquisitions of similar businesses on the market to help determine what people are willing to pay (e.g. 5x sales). This, however, can be a limited approach if the startup is highly unique and comparable transactions may be difficult (if not impossible) to identify.