John Kwon, the managing director of BDO, gives elaborate insights to entrepreneurs on the methodologies used for valuation of private companies. With 140 unicorn companies already existing in the current market, Uber tops the list with a $51B value.

Some of our key takeaways from the conversation:

  1. Valuating a Company:
    There are various methodologies used to valuate a company such as revenue generation, current management, market needs, and much more. In addition to those, there are 3 standard approaches, namely, the income approach, cost approach, and market approach.
  2. Know Where You Stand:
    An entrepreneur should know his business’ market, service, and opportunities. Having a good understanding of their value proposition is necessary to understand where the business stands on the financial side.

Below are some of the key points and moments from the conversation:

  • 0:30 – John Kwon introduced himself and spoke about how to understand the valuations of startup and technology companies
  • 3:30 – Valuation of private companies is difficult as they are not listed on the public stock exchange
  • 5:00 – Estimating cash flows, product development costs and timings, revenue growth, and many other factors are taken into consideration for valuating a company
  • 10:53 – There are about 140 unicorn companies today, out of which Uber’s valuation stands at $51B
  • 15:00 – Amazon had a forward-thinking business model that evolved from books to almost every item one can shop for
  • 16:40 – Entrepreneurs should be savvy about their business’ opportunities, service, and market
  • 21:00 – Preferred share stockholders have different rights from common stockholders, such as liquidation preference, preferred dividends, etc

Speakers

Managing Director, BDO