Trends in Valuation and Fundraising Challanges of Startup

SUMMER INTERNSHIP REPORT | 2023
Summer Internship Project on
"Navigating the Dynamic Startup Ecosystem: A Comprehensive

Analysis of Emerging Trends in Valuation Methods and Fundraising
Challenges”
Submitted By: Vrushti Papoli
Roll no: 122068
Under the guidance of:

Dr. Nilam Panchal
(FDP & SFDP (IIMA), Ph.D., M.Phil., MBA, PGDIRPM)
Associate Professor- MBA (Full Time & Evening)
B.K school of business management
Department of Gujarat university,
Gujarat university, ahemdabad-380009
Company mentor
Mr. Rahul Makahaniya
Chief Marketing Officer
At Delbird PVT LTD, Ahmedabad
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CERTIFICATE OF COMPLETION (COLLEGE)
Phone : 91-79-26304811
Fax : 91-79-26300691
B. K. SCHOOL OF BUSINESS MANAGEMENT

GUJARAT UNIVERSITY
Dr. Prateek Kanchan Gujarat University Campus,

Director Navrangpura,
Ahmedabad – 380 009.
(India)
Certificate of Completion
This is to certify that Ms. Vrushti Papoli, student of Full Time MBA (2022-2024) at B. K. School of
Professional & Management Studies, Gujarat University, Ahmedabad has prepared a Summer Internship
Report on "Navigating the Dynamic Startup Ecosystem: A Comprehensive Analysis of Emerging Trends in
Valuation Methods and Fundraising Challenges” at Delbird Pvt. Ltd. Located at Ahmedabad, From 25th May
2023 to 25nd July 2023 in partial fulfillment of two-year full-time MBA program of Gujarat University. This
project work has been undertaken under the guidance of ‘Dr. Nilam Panchal’, Associate Professor at B.K. School
of Business Management, Gujarat University, Ahmedabad found satisfactory.
Dr. Nilam Panchal

Associate Professor
B.K. School of Professional and Management Studies
Gujarat University
Date: 26s July 2023

Place: Ahmedabad
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CERTIFICATE OF COMPLETION (COMPANY)
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DECLARATION
I, Vrushti Papoli– the student of B. K. School of Professional and Management Studies,

Ahmedabad, affiliated to Gujarat University, hereby declare that the project report on “Navigating
the Dynamic Startup Ecosystem: A Comprehensive Analysis of Emerging Trends in Valuation
Methods" at Delbird Pvt. Ltd. is a result of culmination of my sincere efforts, under the proper
guidance of my mentor and faculties. I hereby declare that this submitted report work is done solely
by me and it is the best of my knowledge and abilities. No such work has been submitted by any
other person. It has not been published anywhere until the date mentioned in the project and is
prepared during and after the completion of the Summer Internship Program with “Delbird Pvt.
Ltd.”. The project report has been authenticated by Delbird Pvt. Ltd. In addition, some of the
information has not been included in the report due to the confidential nature of the data.
Date: Vrushti Papoli
Place: (122068)
MBA full time
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ACKNOWLEDGEMENT
The opportunity I have been provided to pursue an internship with Delbird Pvt Ltd. is a
great chance to apply my knowledge, skills, abilities, creativity and experience in the corporate
world. Therefore, I consider myself extremely fortunate to be provided with such projects. Taking
this golden opportunity, I would like to express my deepest gratitude and special thanks to our
Company Guide, Mr. Mr. Rahul Makahaniya (Chief Marketing Officer) for his constant support
and motivation in completing the assigned projects. Under his guidance, we the interns have been
able to successfully expand our horizon with respect to our knowledge of finance.
I would also like to thank my faculty guide, Dr. Nilam Panchal for her constant support,
mentoring, feedback and guidance. Under her guidance, I was successfully able to complete the
undertaken project on time.
I perceive this opportunity as a big milestone in my career development. I will strive to

use the gained skills and knowledge in the best way possible, and I will continue to work on their
improvement in order to attain the desired career objectives.
Vrushti Papoli
MBA Full Time
2022-24,
B.K. School of Professional and Management Studies,
Gujarat University
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EXECUTIVE SUMMARY
My project report explores the dynamic environment of startup companies. The report examines the
most recent developments in valuation techniques and evaluates the difficulties faced by startups
when trying to raise money. This initiative intends to provide startups with useful counsel in
navigating the intricacies of the contemporary entrepreneurial scene, aiding their growth and
success in securing finance while adjusting to the ever-changing market conditions through in-depth
research and analysis. Startup businesses should position themselves for sustainable growth and
resilience in the competitive business environment by comprehending and tackling these new trends
and difficulties.
During my internship at delbird logistics, I have collected primary data through survey regarding
logistics services used in cloth market Ahmadabad for potential growth of our company.
Additionally, I have also worked in unit economics for optimization of per km cost. I have done
Field work to enhance customer engagement. And in addition, I have done market research
regarding adoption of electrical vehicles for delivery purposes.
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Index
Table of Contents
CERTIFICATE OF COMPLETION (COLLEGE) .................................................................................................... 2
CERTIFICATE OF COMPLETION (COMPANY) .................................................................................................. 3
DECLARATION ....................................................................................................................................................... 4
ACKNOWLEDGEMENT ......................................................................................................................................... 5
EXECUTIVE SUMMARY ........................................................................................................................................ 6
Index .......................................................................................................................................................................... 7
Chapter:1 INTRODUCTION ..................................................................................................................................... 9
1.1 BACKGROUND................................................................................................................................ 9
1.2 SIGNIFICATION OF THE STUDY................................................................................................... 9
1.3 STATEMENT OF PROBLEM ........................................................................................................... 9
1.4 OBJECTIVE OF STUDY................................................................................................................. 10
1.5 SCOPE OF THE STUDY ................................................................................................................. 10
1.6 LIMITATIONS OF STUDY ............................................................................................................ 11
Chapter: 2 INDUSTRY OVERVIEW...................................................................................................................... 12
2.1 The logistics sector in India .............................................................................................................. 12
2.2 The expansion of the logistics sector ................................................................................................. 12
2.3 For-profit business opportunities ...................................................................................................... 13
2.4 The logistics industry in the nation's future ....................................................................................... 13
CHAPTER: 3 COMPANY PROFILE .................................................................................................................... 14
3.1Corporate overview ........................................................................................................................... 14
3.2 Mission & Vision ............................................................................................................................. 14
3.3 SWOT Analysis of Delbird Logistics ................................................................................................ 15
3.4 Services............................................................................................................................................ 15
3.5 Organizational Structure ................................................................................................................... 17
3.6 Dedication ........................................................................................................................................ 18
3.7 Strategy ............................................................................................................................................ 18
3.8 The Work culture ............................................................................................................................. 18
Chapter: 4 THEORETICAL FRAMEWORKS ....................................................................................................... 20
4.1 What is startup?................................................................................................................................ 20
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4.2 Characteristics .................................................................................................................................. 20

4.3 Startup ecosystem India .................................................................................................................... 21
4.4 Stages of startup ............................................................................................................................... 23
4.5 Financing a startup ........................................................................................................................... 25
4.6 Valuation methods............................................................................................................................ 30
4.6.1 Discounted cash flows ............................................................................................................... 30
4.6.2 Comparables .............................................................................................................................. 35
4.6.3 Precedent Transactions .............................................................................................................. 37
4.6.4 Real options ............................................................................................................................... 38
4.6.5The Book Value Method ............................................................................................................. 38
4.6.6 Venture capital .......................................................................................................................... 39
4.6.7 First Chicago ............................................................................................................................. 40
4.6.8 Berkus ....................................................................................................................................... 41
4.6.9 Scorecard valuation ................................................................................................................... 42
4.6.10 The Risk Factor Summation ..................................................................................................... 44
4.6.11 Cost-to-Duplicate..................................................................................................................... 45
Chapter:5 LITRATURE REVIEW .......................................................................................................................... 47
Chapter:6 RESEARCH METHODOLOGY ............................................................................................................ 53
6.1 HYPOTHESIS ................................................................................................................................. 53
6.2 Research design................................................................................................................................ 54
6.3 Source of data .................................................................................................................................. 54
6.4 Sampling method ............................................................................................................................. 54
6.5 Method of data collection ................................................................................................................. 55
6.6 Questionnaire ................................................................................................................................... 55
Chapter:7 DATA ANALYSIS AND INTERPRETATIONS................................................................................... 62
Chapter:8 FINDING AND SUGGESTIONS ........................................................................................................... 70
8.1 Findings ........................................................................................................................................... 70
8.2 Suggestions ...................................................................................................................................... 71
Chapter:9 CONCLUSION ....................................................................................................................................... 72
Chapter:10 REFERNCES ........................................................................................................................................ 73
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Chapter:1 INTRODUCTION
1.1 BACKGROUND
The startup ecosystem is a dynamic and quickly changing environment that is distinguished by
innovation, disruption, and constant change. Startups are essential for advancing technology, creating
jobs, and fostering economic growth. However, because of their brief working histories, hazy
projected cash flows, and high levels of risk, valuing these early-stage businesses presents particular
difficulties. The approaches and strategies used to judge the worth of startups change along with the
startup ecosystem.
Funding for startups has increased significantly in recent years, thanks to venture capital, angel
investors, and private equity organizations. New valuation approaches have emerged as a result of
the growing interest in startups that are specifically suited to their unique qualities. As a result, a
thorough examination of the new patterns in startup valuation techniques is becoming increasingly
necessary in order to provide policymakers, investors, and entrepreneurs insightful information.
1.2 SIGNIFICATION OF THE STUDY

 The study bridges a significant knowledge void in the area of startup management and
entrepreneurship. The profitability and viability of companies are critically dependent on
valuation techniques and fundraising obstacles. The study paper adds significant knowledge
to the corpus of knowledge by providing a thorough analysis of these domains
 The study's conclusions give business owners a better grasp of the many valuation techniques
at their disposal. It enables them to decide more wisely on the value of their firm and how
much stock they would have to give up when financing. With this information, business
owners may approach investors with more assurance and bargain for better conditions.
 The overall startup environment is strengthened by a thorough examination of valuation
techniques and funding difficulties. Startups are important engines of economic expansion
and employment creation, and an informed environment may produce businesses that are
more successful and long-lasting.
1.3 STATEMENT OF PROBLEM

Entrepreneurs and investors alike encounter difficult problems in accurately estimating the value of
early-stage ventures and successfully navigating the fundraising process in the fast-paced and
constantly changing startup ecosystem. A deeper investigation and understanding of new trends in
valuation approaches are urgently needed because the traditional valuation methods that have been
used for decades are proving to be insufficient to capture the actual potential of innovative and
disruptive firms.
The limits of traditional valuation methods, such as discounted cash flow (DCF) and market
comparable, which sometimes overlook intangible assets, distinctive business models, and the
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potential for exponential development in startups, constitute the first component of the issue. As a
result, startups could be undervalued, which makes it harder for them to get the money they need for
growth and development.
Second, new market trends, customer behaviour changes, and a rise in technical improvements are
all bringing about quick disruptions and offering unique valuation approaches that need to be
carefully analysed. The valuation alternatives available to investors and business owners are
numerous and include pre-money and post-money valuation, convertible notes, SAFE agreements,
and other cutting-edge financial instruments. This variety of methods confuses people and raises
concerns about their efficacy, dependability, and applicability for various kinds of businesses.
Additionally, raising money itself poses a number of difficulties for entrepreneurs. In addition to a
strong business strategy and financial projections, persuading potential investors to support their
vision with risk capital necessitates a deep awareness of the subtleties related to various funding
sources. Startups must navigate a complicated web of investors, including venture capitalists, angel
investors, platforms for crowdsourcing, and corporate venture arms, each with their own preferences,
requirements, and expectations.
1.4 OBJECTIVE OF STUDY

This study's objective is to navigate the dynamic startup environment by thoroughly examining the
shifting trends in valuation techniques. This research aims to shed light on the creative techniques
used in the business and their effects on investment decisions by investigating the most recent
approaches to valuing startups.
The difficulties of raising money for startups are also covered in the report. These difficulties include
the difficulty in predicting future cash flows, the scarcity of companies that are comparable, and the
speed at which the startup ecosystem is changing. The report suggests that business owners recognize
these difficulties and take action to lessen them.
By performing an extensive investigation of the new developments in startup valuation techniques

and looking into the accompanying fundraising difficulties, this research study seeks to close this
crucial gap. This study aims to provide entrepreneurs and investors with invaluable insights to help
them make more informed decisions, foster innovation, and contribute to the sustainable growth and
success of startups within the dynamic and competitive startup ecosystem through in-depth
exploration and empirical evidence.
1.5 SCOPE OF THE STUDY

 This study will thoroughly examine the many valuation techniques that are frequently
employed in the vibrant startup ecosystem. This covers both conventional methods like
Discounted Cash Flow (DCF) and Comparable Company Analysis (CCA), as well as cutting-
edge, technologically advanced approaches.
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 This study will investigate the most recent developments in startup valuation techniques. This
will involve looking at how artificial intelligence (AI) and data analytics are being used to
provide more precise values as well as how blockchain technology is being used for efficiency
and transparency.
 This study will list and examine the difficulties faced by startups at the beginning of their
development. This involves problems with entering new markets, finding customers,
developing new products, and having insufficient financial resources.
 This study will look into the difficulties businesses encounter when trying to raise money
from sources including crowdfunding platforms, angel investors, and venture capitalists. This
will include elements affecting the availability of finance, challenges in negotiations, and the
effect of market sentiment on funding opportunities.
1.6 LIMITATIONS OF STUDY

 Limited Sample Size: Data collection from a complete and representative sample of
companies, investors, and valuation specialists may be difficult due to the size and diversity
of the startup ecosystem.
 Dynamic Nature: The startup environment is dynamic and ever-changing. As new technology,
market circumstances, and legislative changes emerge, the trends and challenges identified
during the study could alter quickly. The study might have missed some of the subtleties of
the dynamic environment.
 Response Bias: Stakeholder surveys and interviews with investors and company founders may
be affected by response bias. The objectivity of the study may be compromised if respondents
give responses that are reflective of their values or personal interests.
 Confidentiality Concerns: Startup owners and investors could be reluctant to divulge private
financial and commercial data due to confidentiality issues. This could lead to a lack of data
availability or a reluctance to give specific information.
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Chapter: 2 INDUSTRY OVERVIEW
With a market size of more than $250 billion in 2021, the logistics sector in India is one that is
expanding quickly. Over the subsequent five years, the industry is anticipated to expand at a
compound annual growth rate (CAGR) of 10–12%, driven by the expansion of e-commerce, the
expansion of the Indian manufacturing sector, and the government's emphasis on infrastructure
development.
2.1 The logistics sector in India

A vast number of small and medium-sized firms (SMEs) make up a large portion of the highly
fragmented Indian logistics sector. The market does, however, have a few significant firms, such as
Delivery, Blue Dart, and DTDC. These players provide a variety of services, such as bulk shipment,
same-day delivery, and last-mile delivery.
India's logistics sector deals with a number of issues, such as a lack of skilled labour, high logistical
costs, and insufficient infrastructure. However, the government is taking action to address these
issues, including funding the construction of infrastructure and offering financial incentives to
logistics firms.
2.2 The expansion of the logistics sector

A variety of causes, such as the following, are fuelling the expansion of the logistics sector in India:
 The need for last-mile delivery services is being driven by the expansion of e-commerce. The
Indian e-commerce market had a value of over US$84 billion in 2021, and by 2026, it is
projected to reach over US$200 billion. Due to the necessity for businesses to rapidly and
effectively deliver their products to clients, this increase is fuelling a need for logistics
services.
 The expansion of the Indian manufacturing industry: The need for bulk shipping services is
being driven by the expansion of the Indian manufacturing industry. Over US$2 trillion was
spent on manufacturing in India in 2021, and over US$5 trillion is predicted to be spent on it
by 2026. Due to the requirement for businesses to find effective means of delivering their
products to clients and suppliers, this increase is fuelling a need for logistics services.
 Infrastructure investment by the government: The government is making significant
investments in infrastructure development, which is enhancing the effectiveness of the
logistics industry. The government is expanding the nation's airports, railroads, and roadways,
which makes it simpler to move commodities across the nation.
 Adoption of new technologies: The logistics sector is changing as a result of the adoption of
new technologies like blockchain and artificial intelligence. These innovations are assisting
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in expanding company opportunities as well as helping to increase the efficiency of the

logistics industry.
2.3 For-profit business opportunities

Numerous prospects for enterprises are presented by the expansion of the logistics sector in India.
Businesses who outsource their logistics operations to third-party logistics (3PL) providers can take
advantage of the industry's expansion. Businesses may lower their logistics expenses, speed up
deliveries, and boost customer satisfaction with the aid of 3PL suppliers.
Additionally, by enhancing their own logistical capabilities, firms can profit from the expansion of
the logistics sector. This may entail developing their own logistics infrastructure or investing in
cutting-edge technology like blockchain and artificial intelligence.
2.4 The logistics industry in the nation's future

 The logistics sector in India has a promising future. The emergence of e-commerce, the
expansion of the Indian manufacturing sector, and the government's emphasis on
infrastructure development are likely to fuel the industry's continued rapid growth.
 The future of the Indian logistics industry is also anticipated to be significantly influenced by
the adoption of new technology. These innovations are assisting in expanding company
opportunities as well as helping to increase the efficiency of the logistics industry.
 Overall, the Indian logistics market is a vibrant, expanding, and highly potential sector.
Businesses who can adapt to the industry's shifting terrain will be well-positioned to succeed.
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CHAPTER: 3 COMPANY PROFILE

 About The Company
“Trusted Delivery Partner is just a
CLICK AWAY!”
Delbird is a logistics firm with headquarters in Ahmedabad that strives to reach every area of the
specified destination with attributes like quick delivery, proficiency in careful handling, and supply
chain management.
Delbird is a provider of custom solutions aimed towards facilitating the delivery of your goods while
in transit. Its unique selling point is the squad Delbird, a skilled group of motorcyclists capable of
handling any circumstance.
3.1Corporate overview
Delbird is an Ahmedabad-based, rapidly expanding startup logistics company that specializes in last-
mile delivery services for both B2B and B2C markets. Our mission is to redefine last mile delivery
solutions via innovation and customer-centricity, and to become a leading and reputable name in the
logistics sector.
We provide dependable, timely, and cost-efficient logistics solutions that are adapted to fit the unique
demands of our clients thanks to a committed team of professionals. Our dedication to excellence is
fuelled by cutting-edge technology, effective delivery systems, and a commitment to sustainability.
Integrity, respect, and adaptability Delbird's guiding principles enable staff to operate in a supportive
environment and provide our cherished customers with great service. We take pleasure in our moral
standards and commitment to having a good influence.
3.2 Mission & Vision

Mission
Delbird is dedicated to offering dependable logistics solutions that conserve our clients' time and
resources while putting a high priority on outstanding customer service and long-term profitability.
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Vision
To be the preferred logistics partner for businesses and make a positive impact on the communities
we serve.
3.3 SWOT Analysis of Delbird Logistics

STREANTGH WEAKNESS
Strong management Weak supply chain
Resource availability Online presence
A lack of funding or excessive capital
A skilled workforce
investment
A contribution to customer
A disorganized control system
satisfaction
OPPORTUNITY THREATS
Possibilities include an objective for Rising fuel prices
rapid growth Various government policy changes
the online market Taxes
the introduction of new technologies. Traffic conditions are just a few
examples.
A large number of players
3.4 Services
Delbird is a logistics company It provides last mile delivery services in B2B and B2B sector in
Ahmedabad.
DelBird offers a wide variety of fleet solutions, from 2 to 4 wheelers, that are specifically designed
to fulfill the need of companies doing business in Ahmedabad. We provide the best transportation
option for companies of all sizes because to their adaptable rental plans and affordable rates. DelBird
is your dependable partner for intracity logistics, whether you're a small startup or an established
business.
Prices starts from
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Catalyst of Delbird:
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Delbird is Serving in diverse Industries

DelBird serves a variety of businesses and offers custom logistics solutions to fit each one's particular
needs. Delbird's extensive services provide transportation for companies in a variety of industries,
from e-commerce and retail to healthcare and industry
3.5 Organizational Structure
 Focus on technology and automation: Use cutting-edge tech and automation to improve
efficiency and streamline processes.
 Efficient Delivery Network: Build a strong and efficient delivery network by partnering with
local delivery agents, couriers, or independent contractors. This can help ensure timely and
cost-effective deliveries.
 Customer-Centric Approach: Place a high priority on ensuring that customers are satisfied
by offering top-notch customer care, prompt updates on the status of deliveries, and simple
contact channels for handling consumer questions and issues.
 B2B Solutions: Develop tailored logistics solutions for businesses in the B2B sector. This
may involve providing supply chain optimization, bulk delivery services, or inventory
management solutions.
 Quality Control and Training: Maintain high-quality standards for delivery services and
invest in training for delivery personnel to ensure professionalism and reliability.
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3.6 Dedication
 Dedication to Customers: We are unwavering in our commitment to meeting and exceeding

the needs of our customers. Their satisfaction and trust are at the core of everything we do.
We will go the extra mile to ensure timely, secure, and hassle-free deliveries, providing them
with peace of mind and convenience.
 Commitment to Innovation: In a field that is constantly changing, Delbird is dedicated to
ongoing innovation. By utilizing innovative techniques to improve our offerings and
streamline our processes, we will stay ahead of the competition.
 Commitment to Growth: We are enthusiastic about development and growth. Our
commitment also extends to building up our workforce, enlarging our network, and grabbing
chances to flourish in the logistics sector.
3.7 Strategy
 Develop a flexible pricing plan that is competitive and in line with market demands and
customer expectations. To show the calibre of the services being offered, think about value-
based pricing.
 Customer Service and Experience: Throughout the delivery process, place a high priority
on providing great customer service. Make sure you communicate clearly and on time, solve
problems quickly, and give each customer their own attention.
 Growth strategy and scalability: Create a scalable strategy early on. Create a growth
strategy that includes growing the distribution network, breaking into new markets, and
forming strategic alliances.
Create a feedback system to get feedback from clients on how they found Delbird's services.
Utilize this feedback to pinpoint areas that require improvement and consistently raise service
standards.
3.8 The Work culture
The foundation of Delbird's workplace culture is respect, inclusivity, and open communication. We
encourage teamwork, employee empowerment, and success celebration. We prioritize employee
well-being and provide learning opportunities for advancement with an emphasis on work-life
balance. Our encouraging leadership promotes moral behaviour and methods that are results-oriented.
Fun things to do improve team relationships and encourage social interaction. We are robust and
flexible in difficult circumstances, viewing change as an opportunity. A motivated and engaged team
committed to providing top-notch last mile services to our customers is ensured by Delbird's good
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workplace culture. Delbird is a successful and customer-focused logistics firm because to our
diversified and cohesive workforce, which works together to achieve greatness.
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Chapter: 4 THEORETICAL FRAMEWORKS
4.1 What is startup?
 A startup is a new business that one or more entrepreneurs founded. It has been discovered to
create distinctive products or services and promote them. The first investment for a normal
business typically comes from the founder(s) or their family and friends.
 “A startup is a temporary organisation design to search for a REPEATABLE and SCALALBE
business model”
 The startup's initial task is to raise a significant amount of money to continue product
development. To do that, they must present a compelling case—if not a working prototype—
to prove that their concept is far better than anything currently on the market or truly novel.
 The startup ecosystem is praised as an innovation incubator and a significant force behind the
production of wealth and jobs. Actually, the majority of startups fail during the first few years
of business.
 A startup is a business venture that is looking for sufficient financial support to get off the
ground.
 The first difficulty for a startup is to convince possible lenders and investors that the concept
is viable. Although startups are always risky endeavours, potential investors have numerous
methods for estimating their value.
4.2 Characteristics
These characteristics set startups apart from established companies and make them crucial
agents of economic development and innovation across a range of sectors.
 Innovation: Startups are based on ground-breaking concepts, goods, or services that solve
problems in creative ways or address market gaps. They seek to upend established industries
or propose fresh ideas, concepts, or business methods.
 Scalability: New businesses have the potential to develop quickly and significantly. They can
rapidly grow their operations and customer base since their business models are built to scale
well. Startups can frequently expand their market reach and increase their revenue as they
grow.
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 High Risk-High Reward: Startups operate in an environment of uncertainty and risk. Many
startups face the risk of failure due to market competition, financial challenges, or other
factors. However, successful startups have the potential for substantial rewards, including
significant financial returns and market dominance.
 Entrepreneurial Spirit: Startups are driven by a strong entrepreneurial spirit and a passion for
their vision. Founders and team members are often highly motivated, willing to take calculated
risks, and are adaptable to the dynamic nature of the startup journey
4.3 Startup ecosystem India
India has enormous potential given the size of its people and the low cost of conducting business
there. Over the past few years, the nation has solidified its position as a global leader in technological
services and experienced a unicorn boom. India's exceptional growth trajectory in the startup scene
can be largely ascribed to the size of its domestic market and its sizable IT industry. The startup
ecosystems in the nation are a growth driver for its economy and have the potential to increase India's
productivity and completely reshape the nation.
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The prevalence of CEOs leading corporations like Alphabet, Adobe, and Microsoft is evidence of the
entrepreneurial talent of Indians. However, as some of India's greatest talent has left, this also
demonstrates the enormous cost of brain drain. As higher education in India grew over the past
decade, the government recognized the potential of this valuable resource for its economy. In 2019,
the government launched the National Innovation and Startup Policy 2019 for Students and
Faculty, providing a regulatory framework for innovation and entrepreneurship in universities. Apart
from brain drain, India faces challenges with its digital infrastructure. Internet speed is low compared
to most other countries, and power outages are frequent. The Indian government could take additional
steps to improve this critical infrastructure and strengthen its startup ecosystem, as other countries in
the region are growing fast. India’s successful startups and unicorns are focusing on the massive
potential of the local market. However, for India to achieve a status of a global tech hub, its startups
will have to focus more on regional and global markets.
The ecosystem is backed up by multiple support organizations, including the Alliance of Digital
India Foundation. In addition, Startup India, the Government’s flagship startup initiative, as well
as Make in India, signal the public sector’s commitment to building regulatory frameworks for the
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ecosystem. But concerns have been raised about the impact of new policies on the ease of doing
business in the country. An example of a strange policy that is sure to do damage to the local
ecosystem and chase entrepreneurs away, the recently introduced angel investor tax potentially taxes
companies when receiving investments. Considering that India enjoys good ties with most of the
world, we are optimistic about its chance to continue to grow and assume a bigger role in the global
startup ecosystem. When considering India’s core advantage of an educated, young, English-speaking
population, the country’s potential is immense.
4.4 Stages of startup

Ideation, Growth, and Expansion are the three stages of a typical startup lifecycle.
In the previous ten years, it took a startup nine to ten years on average to become a unicorn. In the
previous two years, this has been reduced to six years.
Every phase of a startup is distinct and has its own set of difficulties. The startups that can overcome
these obstacles deftly have a tendency to succeed in the Indian startup ecosystem.
Startups can be categorized in a variety of ways, including by country, industry, company worth, etc.
However, based on their maturation stage, startups are categorized in one of the most common
methods. There are six distinct maturity phases that a startup goes through throughout the course of
its lifecycle, according to the literature in the field.
Early Stage
This is the beginning of the journey for a startup. The early stage of a startup can be further divided
into the following mini-stages:
 idea Stage: During this phase, the majority of founders look for a concept that has the potential
to become very successful. This is a really delicate situation because the founders' future
course is decided at this point. To assist founders at this stage, the startup ecosystem has
various incubators established up across India. Popular examples include Startup Kerala
Mission, Atal Incubation Centers (AICs), and K-Tech Innovation Hubs.
 Pre-Seed: At this point, the ideas have already been identified. The startup's fundamental
organization is well known to the founder. They are prepared with a prototype and an
organized business strategy. This plan describes the startup's financial needs as well as other
information including a go-to-market strategy and potential difficulties. A clear and simple
business plan aids in the decision-making process for the investors.
 Seed: At this stage, startups would prefer to have a few paying customers. There will be a
positive curve in the client traction. Investors are competing in this round for a piece of the
startup's stock. The proceeds from this round of fundraising are typically utilized for
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marketing, hiring, and product launches. Here, the startup would also begin with the basic
marketing strategy.
 Early-stage investments typically come from friends and family, government grants, or angel
investors. The size of the investment is subject to the business plan of the startup.
Growth Stage
 Series A: Startups that have a consistent track record of revenue generation go on for Series
A funding. The money raised in this round typically goes into optimising the startup in terms
of technology, team, research and development of new products.
 Series B: At this stage, a startup would already have a concrete clientele and a sustainable
revenue stream. The expenses start to fall into buckets that can be analysed and improved
upon. Funds raised during this stage usually go into the deeper market study, technology, and
getting specialised employees. Similar to series A, the investors here are venture capitalists
who specialise in growth-stage investments in startups.
Late Stage
 Series C: Startups at this stage have a considerable client base in one geographical region of
the world. They are looking for overseas expansion and to venture into newer markets. Funds
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raised in this round are typically used for the same purpose. Sometimes startups in this stage
tend to acquire smaller underperforming startups in the same segment. At this stage,
investments often come from hedge funds, investment banks, and private equity firms.
 Series D, E: Startups that show growth potential even after their series C funding tend to go
in for further rounds of funding. Here the concentration is purely on acquiring newer markets
through multiple methods. The startup might also look at more aggressive acquisitions of
similar startups that could pose a threat. Sometimes, funds are also raised to rectify mistakes
made in the earlier stages of the startup. The investments here also come in from hedge funds,
investment banks, and private equity firms.
IPO/Exit Stage
At this stage, the startup is ready to go public. The public is offered shares of the startup in exchange
for money. The money raised here is usually for the growth of the startup to the next level and to
provide an exit for the investors. As next steps, a team of legal and SEC experts are contacted. This
stage involves a lot of work around financial data with a focus on market size and auditing the asset
list and liquidity ratio. Recently, the startup ecosystem has seen new ventures working proactively in
this segment.
Let’s take the example of Nykaa, an Indian startup that was launched in 2012 and went public in just
ten years. Interestingly, currently, Nykaa is valued higher than legacy Indian companies such as
Britannia, Marico, and Godrej Consumer at a market cap of INR 1 Lakh Cr.
Every stage of a startup is unique in its way. Each stage comes with its own set of challenges. The
startups that can push smartly through these challenges tend to make it big in the Indian startup
ecosystem. The Indian ecosystem is vigorously working towards reducing the time taken for the
startups to move from one stage to another. As a result, we have already seen 11 unicorns come up
in 2022, taking the total tally of Indian unicorns to 97. With more unicorns on the horizon, 2022 is
bound to be a blockbuster year for the Indian startup space.
4.5 Financing a startup

Each maturity stage of a startup is associated with different funding sources: From FFF in the earliest
stages of maturity, to venture capital, business angels and crowdfunding, as well as financing from
the capital markets or commercial banks. As any other company, startups can finance through equity
or debt
Angel investors
Individual investors or a group of people with extensive experience or close family ties are called
angel investors. The majority of them have gone through the process of launching a firm and are
seasoned business owners. They are aware of both the opportunities and the pain spots.
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These investors have extra money that they are willing to invest in the seed stage of your business.
Before investing, they investigate the startup, do their homework, and find out how much the
entrepreneur has put up. Once you've persuaded them, they agree to provide you with capital in
exchange for convertible debt or equity in your firm
Young entrepreneurs are mentored by angel investors. However, they make smaller investments than
venture capitalists and anticipate greater profits. Several well-known individual investors include
Ritesh Malik, Rajan Anandan, and Kunal Shah.
Platforms & Angel Networks
Where angel investors pool their money to invest in businesses is on angel networks and platforms.
These investors can give higher sums of money and manage risks since they work as a group. The
platform receives stock ownership in the firm and gains from its success.
Popular platforms include LetsVenture, Venture Catalysts, and AngelList.
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Venture Capital Funds
Venture Capital Funds are an institution whose business is to provide capital to promising startups.
This point is where the startup funding goes to the next level. As venture capital funds are an
institution, they provide large amounts of capital to a company for growth and expansion and monitor
its progress to ensure their investment delivers sustainable development
Venture capital funds get equity or equity-linked instruments from startups in return for the funding.
They leave the company when it releases an IPO or is acquired. Micro VCs One type of venture
capital has a smaller fund size, between $60 and $70 million. Micro VCs provide funding for early-
stage firms in exchange for an equity stake.
Corporate Venture Capital
Another branch of VC is Corporate Venture Capital (CVC). CVCs are large multinationals that invest
corporate funds into small, innovative startups either for technology, talent pool, or to acquire a target
market.
CVCs provide startups with resources like marketing expertise, strategic direction, or a line of credit.
Being associated with big names gives startups a boost. CVC provides funding in exchange for an
equity stake in the startup. Among Indian CVCs are Mahindra Partners, Reliance Ventures, and Times
Group’s Brand Capital.
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Venture Debt Funds
Equity is an expensive source of funding for startups. Hence, non-banking financial corporations
(NBFCs) offer a hybrid scheme called venture debt funds that provide debt financing to VC-backed
startups. Bank loans or equity are not a viable funding option when a startup is expanding and needs
working capital.
Venture debt funds lend you money in return for non-convertible debentures (NCDs) and equity
warrants. Alteria Capital and Trifecta Capital are some players that provide venture debt financing to
Indian startups.
Government Grants & Funds
Funding for Indian startups went beyond angel investors and VCs in 2016 when the government of
India launched the ‘Startup India’ program. The program offers grants, like an 80% rebate on patent
costs and income tax exemption for the first three years, to startups registered under the scheme.
The government disburses the funds as loans through the Small Industries Development Bank of India
(SIDBI) Fund of Funds Scheme. The scheme invests in venture capital and alternative investment
funds (AIF) that invest in startups. Last year, the government also launched the Startup India Seed
Fund scheme which provides funding support to early stage startups.
For the current year, the government has allocated INR 1,000 Cr for the Fund of Funds for Startups
and INR 283.5 Cr for the Startup India Seed Fund Scheme (SISFS).
Incubators & Accelerators
Incubators and accelerators are like preparatory schools for businesses, whereas all of the
aforementioned funding choices are for startups that are currently operating. These programs, which
last between four and eight months, give entrepreneurs access to cash as well as a network of mentors,
investors, and firms.
Typically located in large cities, accelerators and incubators accept an ownership investment in
exchange for the program. These programs are either managed by independent organizations, or they
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are a component of big businesses or technological giants. Y Combinator, GSF Accelerator,

Microsoft Accelerator, Google Launchpad Accelerator, JioGenNext, and others are some of the well-
known accelerator programs for Indian entrepreneurs.
Family Offices
Another emerging funding for Indian startups is family offices. India has a history of family
businesses that pass on their wealth to the next generation. Examples include Azim Premji of Wipro,
Anirudh Damani of K. Damani Group, and Gaurav Burman of Burman Family Office (investor in
Dabur India). This next-generation seeks to break the stereotype and invest in different avenues.
Family offices are more patient than angel investors and give startups more time, money, and
resources to grow their businesses. But the trick is to approach the right family office. India has over
140+ family offices that have heavily invested in the Indian startup space. They have been pro-
actively involved in 50+ such deals every year since 2015, a report by Praxis Global Alliance and
256 Network. The report further predicts that Indian Family Offices are expected to contribute 30%
of the estimated $100 Bn to be raised by Indian startups by 2025.
Banks
The traditional funding option of bank loans still exists among all the various funding possibilities
for Indian companies. For various business purposes, banks provide a variety of loans, including
working capital loans, startup business loans, and loans for equipment, each with a unique set of
terms. Every stage of a firm can get a loan. Banks often demand larger collateral with additional
sources of revenue for startups in the idea stage. Popular banks and NBFCs like Fullerton India and
Omozing.com provide financing to Indian startups.
Crowdfunding
Crowdfunding is an additional, less well-liked method of startup fundraising. On a platform, a group

of retail investors seeking out alternative investment opportunities congregate, peruse the business
plan, and invest in the startup of their choosing. Peer-to-peer lending involves each investor
contributing a certain amount to a business idea in the hopes of receiving a better interest rate. There
is also equity crowdsourcing, but it's not clear if it's allowed in India. Crowdfunding is prone to
scandals and con artists. Unregistered digital crowdfunding platforms are discouraged by SEBI. Some
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of the notable crowdfunding platforms for startups include Indiegogo, SeedInvest Technology,
Mightycause, StartEngine, GoFundMe, Patreon, GripInvest, ImpactGuru.
financing based on revenue
A firm can receive its future earnings in advance thanks to revenue-based financing, making it simple
to use them for inventory, marketing, and advertising expenses. The payment component is adjustable
and represents a predetermined percentage of the monthly revenue that a business generates. India
has recently witnessed the emergence of a number of revenue-based financing firms that are servicing
the revenue requirements of the companies.
Companies that provide revenue-based financing for startups in India include Velocity, Klub, and
GetVantage, among others.
4.6 Valuation methods
4.6.1 Discounted cash flows

The Discounted Cash Flow (DCF) analysis is one of the most common ways to value a company, in
particular, mature and publicly traded companies whose financials are accessible, stable and
predictable. In case of early-stage startups, the DCF method is not very popular as it is difficult to
predict their future cash flow prosects. The DCF method returns the enterprise value of a company
by calculating the present value of the future free cash flows that the company will generate in the
future, discounted by a discount rate that takes into account the risks and financing costs, reflecting
all the business’s creditors. The following formula depicts the present value of a company at time
zero.
𝐹𝐶𝐹1 𝐹𝐶𝐹2 𝐹𝐶𝐹𝑡 𝐹𝐶𝐹𝑡

Value v0= (1+𝑟𝑑)1+(1+𝑟𝑑)2+…………+(1+𝑟𝑑)𝑡 =∑(1+𝑟𝑑)𝑡
EVo: Enterprise Value at time period t = 0

FCFt: Cash Flows to the firm in period t
rd: discount rate
t: Time period from one to infinity, in years
The FCF are normally calculated for a finite number of periods (e.g., six years), as it becomes
difficult to estimate their growth for very distant time periods. Therefore, defining a new
variable called n, which accounts for the number of periods for which we will calculate the
FCF, the formula results as follows, where the TVN refers to the terminal value of the firm:
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∞
𝐹𝐶𝐹𝑡
𝐹𝐶𝐹1 𝐹𝐶𝐹2 𝐹𝐶𝐹𝑡
𝐸𝑉0 = + + ⋯+ = ∑ (1 + 𝑟𝑑 )𝑡
(1 + 𝑟𝑑 )1 (1 + 𝑟𝑑)2 (1 + 𝑟𝑑 )𝑡
𝑡=1
Where:
TVN: Terminal Value of the firm at time period n = N
n: Number of periods, from n = 1 to n = N
Free Cash Flows (FCF):
As stated before, FCF are only calculated for a finite period of times, which is defined as N
time periods. The remaining time periods, i.e., from n = N to n = ∞, are grouped into the
Terminal Value component.
FCF are the cash flows available of the company, i.e., “free” to pay its debt and equity
holders, in other words, to repay creditors or pay dividends and interest to investors. The
FCF formula is as follows:
𝐹𝐶𝐹 = 𝐸𝐵𝐼𝑇 ∗ (1 − 𝑇𝑐) + 𝐷&𝐴 − 𝐶𝐴𝑃𝐸𝑋 − ∆WC
Where:
EBIT: Earnings before interest and taxes
Tc: Tax rate
D&A: Depreciation and Amortization
CAPEX: Capital expenditure
∆WC: Number of periods, from n = 1 to n = N
EBIT is calculated by subtracting the firm’s cost of goods sold (COGS) and its operating
expenses from its revenue. Some examples of operating expenses could be salaries, research
and development or administrative expenses. Once the EBIT is obtained, it is multiplied by
(1-Tc) to reflect the effect of taxes. Then, it is needed to add back depreciation and
amortization, as well as subtracting capital expenditures and the change in working capital
requirements
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Discount rate
The discount rate, a part form reflecting the time value of money, must take into accountthe risks
and financing costs, reflecting all the business’s creditors and expressing the riskiness of the future
cash flows. Hence, it is defined the Weighted Average Cost of Capital (WACC):
Where:
E: Market value of equity shares
D: Market value of net debt
P: Market value of preferred stock
KE: Cost of equity

kD: Cost of debt
Tc: Tax rate

KP: Cost of preferred stock
As seen in the formula, the WACC is a weighted average between the cost of debt (KD)and cost of
equity (KE). The cost of debt, which is the return that a company provides to its debtholders and
creditors, can be estimated in two ways. The first one would be to lookat the current yield to maturity
of the company’s debt, while the second approach would be to look at the credit rating of the firm
provided by a credit rating agency (e.g., S&P,Moody’s, Fitch) and then adding this yield spread to
the risk-free rate.
In the case of the cost of equity, is usually calculated using the Capital Asset Pricing Model
(CAPM), which is used to determine expected returns on equity investments, providing a
methodology for quantifying risk and translating them into estimates of expected return on equity:
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𝐸(𝑟𝑖) = 𝑟𝑓 + 𝛽𝑖 ∗ 𝑅𝑖𝑠𝑘 𝑃𝑟𝑒𝑚𝑖𝑢𝑚 = 𝑟𝑓 + 𝛽𝑖 ∗ [𝐸(𝑟𝑚) − 𝑟𝑓]
Where:
E(ri): Expected return on the capital asset for irf:
Risk-free rate
βi: Beta coefficient
E(rm): Expected return of the market
Risk Premium = [E(rm)-rf]: Excess return expected to yield
The βi measures the volatility of returns relative to the overall market, so it is a parameter that
measures the sensitivity to the market risk. For instance, if βi=1, the expected return is equal to the
average market return, but if for instance the beta coefficient of a company is βi=2, the security
doubles the volatility of the market average. The beta coefficient can also take negative values,
meaning that for a βi=-1, that can be interpreted as the expected return moves in the opposite
direction from the market. In summary, for every one unit increase in the βi, the return E(ri) will
increase by the beta coefficient value, and in the opposite way for negative values of βi. The
coefficient is defined as follows:
𝐶𝑜𝑣(𝑟𝑖, 𝑟𝑚)
𝛽𝑖 =
𝜎2 (𝑟𝑚)
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Where:
Cov(ri,rm): Covariance between the asset i return and the market return
σ2(rm): Variance of the market’s return
βi is generally calculated based on similar companies to the one we are trying to value.However,
the Beta for a company called “z” (βz) will reflect z’s capital structure. In order to obtain the βz
independent from z’s capital structure, or in order words, to obtain the Unlevered βz, it is needed to
un-lever βz and all other betas belonging to the set of comparable companies used to calculate the
beta of the company we want to value:
Levered β
Unlevered β (Asset Beta) =
1 + (1 + Tc) ∗ (D/E)
D
𝐿𝑒𝑣𝑒𝑟𝑒𝑑 𝛽 (𝐸𝑒𝑞𝑢𝑖𝑦 𝐵𝑒𝑡𝑎) = 𝑈𝑛𝑙𝑒𝑣𝑒𝑟𝑒𝑑 𝐵𝑒𝑡𝑎 ∗ [1 + (𝑇𝑐) ∗ ( )]
𝐸
Having these two equations in mind, which at the and derive from the same formula, the summarized
procedure used to calculate the desired unlevered beta (βi) is to gather a set of comparable companies,
take the average and re-lever the beta based on the capital structure (i.e., debt-to-equity ratio) of the
company that is being valued.
The unlevered beta can at most the same as the levered beta or lower, meaning in thiscase that the
debt is equal to zero, when the company is completely equity financed. However, in case of negative
debt, the unlevered beta can become higher than the leveredbeta.
On the other hand, startups tend to have few similar public or private peers in the market due to their
nature, which makes it very complicated to estimate a reliable beta. Consequently, beta estimation
based on the previously detailed CAPM method becomes less popular for startups, specially for the
ones that are in early stages of development. Inaddition, the equity in a young company is often held
by its founders or venture capitalistsand as a result, these investors are unlikely to accept the fact that
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the only risk that mattersis the risk that cannot be diversified and instead will demand compensation
for at least some of the firm specific risk Instead, they tend to estimate the value of beta based on
internal return expectations and perceived risk of the startup and the general market.
Along the lines of the limitations previously mentioned when attempting to obtain the beta for a
young company, another methodology used to estimate its value is by adjustingthe CAPM model in
order to reflect the intrinsic characteristics of a startup, such as its stage of development, level of
technological adoption, level of risk, capital and organizational structure, or the sector within they
operate, among others.
1+𝑔
𝑇𝑉 = 𝐹𝐶𝐹𝑛 ∗
𝑟𝑑 − 𝑔
Where:
FCFN: Free cash flows of the firm on the last forecasted year n = Ng:
growth rate (similar to the country’s GDP growth or inflation)
4.6.2 Comparables
The first relative valuation method is Comparable companies, which consists basicallyof valuing
the concerned firm by comparing it with companies with similar characteristics. Although it’s a
methodology used mainly to value mature companies since financial data from the set of comparable
companies selected is needed, it can be also used for early stage and mature startups.
The methodology to follow in order to value a company based on the Comparables method
consists of (1) finding the right comparable set of companies, (2) gather their financial data, (3)
defining which financial parameters and multiples are going to be compared, and finally calculate
the comparable ratios.
(1) Find the right comparable set of companies
This first step is the most subjective and complicated, as it is based on the arbitrary selection of
the person performing the analysis. However, there are some guidelines that should be followed once
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selecting the peers. The set of companies selected should havesimilar characteristics to the one that
is being valued in terms of:
i. Industry: Same industry or sub sector of operation.

ii. Geography: Where the company is based and where it operates.
iii. Financials and others: Size in terms of revenue, assets and employees, aswell as
similar growth rate and profitability.
As mentioned, finding reliable data is a key part of this step. Several tools such as S&PCapitalIQ
or Bloomberg can be used in order to help finding the right peers. These databases provide a list of
similar companies operating in the same industry, county and with similar financial performance.
(2) Gather financial data
Once again, databases like CapitalIQ or Bloomberg con provide all financial data needed. It is
also possible to manually gather financial information by searching in the company’s annual and
quarterly reports. However, although it is easy to find data for publicly traded companies, it can be
hard to find data for companies in early stages of development. In this case, other tools like
CrunchBase can be used to find startups that recently received funding that have similar
characteristics to the startup being valued.
The information needed varies depending on the industry or maturity stage of the company. For
example, in the case of mature or publicly traded companies, metrics like EBITDA, EBIT and EPS
will be more useful. However, for early-stage companies metricslike gross profit or revenue will be
probably more insightful.
(3) Define and calculate the comparable multiples and ratios
One the financial data needed is gathered, a comps table is usually created, which states all the
financial parameters for all peers. Then, using the comps table built, the ratios can be calculated.
Normally, the ratios used are EV/Revenue, EV/Gross Profit, EV/EBITDA or P/E. Finally, a
summary table is created with the average outcome of eachof the ratios selected.
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4.6.3 Precedent Transactions
The second most common relative valuation method is Precedent Transactions. It consists of
valuing a company by comparing it on the price paid on recent acquisitions of comparable
companies. In the case of startups, this methodology requires public data from comparable
transactions that can be difficult to find. However, several databases such as Merger Market can be
used to find the data needed.
The methodology to follow in order to value a company based on precedent transactions

method is composed by the following steps
(1) Find and filter relevant precedent transactions
While finding precedent transactions, it is important that the selected comparable companies
follow the criteria. Comparables. In addition, it is important to add the time dimension since the
transactions must have happened in recentyears. Again, tools like CapitalIQ or Bloomberg can be
very helpful.
(2) Determine a range of valuation multiple
From the list of selected transactions, it is necessary to eliminate outliers and then calculate the
average of the selected multiples, in the case of precedent transactions analysis tends to be
EV/EBITDA and EV/Revenue.
(3) Apply the defined multiples to the company being valuated
Once the range has been defined, it is time to determine a range of acceptable values for each of
the selected multiples. Finally, it is important to state that the enterprise value obtained through
this valuation method will be probably higher than the values obtained through other methods,
mainly because precedent transactions method considers the premium paid to acquire the
concerned company.
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4.6.4 Real options

Before describing Real Options from a valuation point of view, it is worth to define thoseoptions
can be classified into two categories: financial and real, based on whether the underlying asset is a
financial asset, such as stocks or bonds, or a real asset, such as realestate, projects, and intellectual
property (Prasad Kodukula, 2006).
Some traditional valuation methods do not consider the nature of a startup and its potential highly
promising future. For example, DCF analysis is based on a set of assumptions related to the project
payoff, which is an uncertain and probabilistic parameter. In addition, DCF does only account for
the downside part of the risk but not forits potential reward, and also does not consider managerial
flexibility. In other words, from a DCF point of view, an investor will just invest in a project of the
net present value of the project is positive. On the contrary, Real Options analysis attempts
complement some traditional valuation methods by addressing the limitations and filling the gaps
of these methods.
4.6.5The Book Value Method
The Book Value Method consists of calculating the value of a company through its accounting books,
by basically getting the total assets of the company and subtracting the total liabilities:
𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑎 𝐶𝑜𝑚𝑝𝑎𝑛𝑦 = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
It is a method used to double check other valuation methodologies. However, it can be used as a
primary valuation technique for companies with expensive assets and low profits. For example, let’s
imagine a firm with $1,000 of profits for a giver year and a book value of $1 million. The selling
price of this firm would be linked to its book value rather than its profitability (Bob Adams, 2020).
Book valuation is subject to adjustments, such as depreciation. It is mainly focused on tangible

aspects of the firm, which makes it a poor valuation technique for startups or companies that are
focused on intangible assets (e.g., new business model, research and development, intellectual
property, etc.).
Liquidation value
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Following the same line as in the Book Value Method, this technique assumes that the assets of the
company are sold in order to repay the company’s liabilities. In other words, Liquidation Value is the
net value of a company's physical assets if the assets were sold, and the company goes out of business.
Again, this methodology does not consider intangible aspects such as intellectual property or brand
recognition.
𝐿𝑖𝑞𝑢𝑖𝑑𝑎𝑡𝑖𝑜𝑛 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑎 𝐶𝑜𝑚𝑝𝑎𝑛𝑦 = 𝑇𝑎𝑔𝑛𝑔𝑖𝑏𝑙𝑒 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
This method normally leads to lower value of the firm compared to others, and it is commonly used
in bankruptcy scenarios, where some of the assets are forced to be sold below its book value, due to
the rush to repay debtholders.
4.6.6 Venture capital

This method was developed in 1987 by William A. Sahlman and Daniel R. Scherlis in Harvard
Business School, and it is detailed in the published case study (Method for Valuing High-Risk, Long-
Term Investments: The “Venture Capital Method,” 1987). As its name describes, it focuses on
valuing high-risk, long-term investments such as those confronting venture capitalists by forecasting
a future value and discounting that terminal value by applying a high discount rate. In summary, the
Venture Capital Method is a simple net present value that takes the perspective of the investor (i.e.,
venture capitalist) instead of the company
Before detailing the methodology, it is important to define to key concepts: Pre and Post Money
valuation. The pre-money valuation refers to how much a company’s equity is worth before an
investment round of financing is performed. Once the financing round is finalized, the resulting value
of the company’s equity rises by the amount of funding raised, which is equal to the post-money
valuation, leading to the following equation:
𝑃𝑜𝑠𝑡 = 𝑃𝑟𝑒 + 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
Where:
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Post: Post-Money Value of the company’s equity
Pre: Pre-Money Value of the company’s equity
Investment: Funding invested in the company in the last financing round
The first step is to estimate a terminal value of the startup at the time of exit, since normally this
method is used for early-stage startups which have not generated revenue yet. This estimation can
be done by using multiples.
One the terminal value has been estimated, it has to be discounted using a proper discount rate.
This point is crucial, and as stated at the beginning of the section, this method values the
company form the investor’s perspective instead of the company. Therefore, the WACC is not an
adequate discount, and instead, the Return on Investment(ROI) the investor is willing to achieve is
much more useful.
4.6.7 First Chicago
It is a method of business valuation that venture capitalists and private equity investors employ for
early-stage businesses. This model combines the multiple-based method with discounted cash flow.
It used three alternative scenarios to assess the risk associated with forecasting cash flows.
a) Base case is based on less delays and growth to complete the projects, requiring higher costs.
b) best case is normally compliance with the Business Plan.
c) Worse case relates to a perpetuation of the status quo. Sometimes the planned operations may
involve
initial losses and result in a value below the additional capital needed
Using a rate of return required by venture capitalists, the three values are weighted by the probability
of each Scenario occurring and then added together. An estimate of the additional equity required is
then deducted to calculate the Net Income Value.
The First Chicago methods allows to consider as many valuation scenarios as desired.However,
the greater number of scenarios N the higher the complexity of the overall valuation. The discount
rate rd tends to be lower than in the Venture Capital method sincerisks of the different scenarios are
already considered when assigning the probabilities. The main advantages of this method that it can
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incorporate potential payments from the company to the investor within its holding period and a well
assessment of the risks taken,which are reflected by the probabilities pi and the discount rate rd.
4.6.8 Berkus
Berkus valuation method, developed by the American business angel and investor Davide W.
Berkus in the 90s decade. It was designed as a tool to value early-stage startups without having to
rely in financial forecasts. Therefore, the method does not relyon financial metrics but on qualitative
factors driven by the startup’s operations and risks. Based on five operational crucial factors
identified by Berkus, indicating a value ranging from zero to $500,000 for each factor, leading to a
maximum of $2.5m valuation. However,Berkus states that this method can only be used for startups
which are expected to reach
$20m in revenues in the next five years.
Crucial factor Value added to the company
Sound Idea (Production Risk, Basic Value) From $0 to $500,000
Prototype (Reducing Technology Risk) From $0 to $500,000
Quality Management Team (Reducing Execution Risk) From $0 to $500,000
Strategic Relationship (Reducing Market Risk) From $0 to $500,000
Product Rollout or Initial Sales (Reducing Production Risk) From $0 to $500,000
Table 2: Crucial Factors of the Berkus Model
Starting from the first crucial factor, Sound Idea refers to the potential of the business idea planning
to be developed by the company. Also, the potential of the idea to solve a problem or improve an
existing business model. Some of the sub factors that can be assessed in order to estimate the value
of the Sound Idea are the proprietary nature of the idea (idea potentially secured by patents), the
future plan and direction of the startup,the scalability of the idea, and the socio-political relevance.
The second success factor, Prototyping, is a replica of the concept planning to be deployed in the
market, with the aimgathering feedback from customers and identifying the problems and defects of
the product before investing and launching the final concept. Prototyping can be seen as a
technological risk management tool for start-ups. The third success factor refers to Quality
41
Management Team in terms of experience of the founders in the field, which provides a sense of
security to the investors. The fourth factor is Strategic Relationship, which is basically the
collaboration between parties in order to achieve a goal. In the startup environment, normally it is
necessary to partner with large and well-established entities inorder to, for example, enlarge the
customer base or reach new markets. Finally, the fifth and last factor is Product Rollout or Initial
Sales. It is the last and the most crucial stage of the product development process, and it includes a
product plan that describe the marketing strategy, target audience, resources used and a diligent
timeline.
Finally, the Berkus method is widely used for valuing tech startups. One of the main drawbacks
is its oversimplified framework and the subjectivity of the method. However, considering that this
method is used to value pre revenue startups in early stages of maturity, it can be significantly useful
if the chosen values used for each success factor are properly assigned.
4.6.9 Scorecard valuation

Th1e Scorecard valuation approach also tackles the challenging task of valuing pre revenue
startups. It is also known as 11Bill Payne valuation method, in honor to its author. More than a
valuation method, it is considered a tool to help angel investors find an average valuation for
startups that can potentially generate and grow in terms of revenuein the future.
The Scorecard approach is based on the comparison of the target company with other similar
companiesin the industry in terms of the stage of development, sector, and geographic location.
Then, once an average valuation has been found, it needs to be adjusted.
The first step of this method is to compute a median pre-money valuation, by comparingthe target
startup with similar startups in the market. This is basically done by taking a setof several relevant
startups with available and recent data regarding its valuation and compute the average. Then, the
second step consists of using the scorecard defined by Bill Payne, based on several comparison
factors and weights:
42
Comparison Factor Weight Target Company Factor
(From 0% to 30%) (From 0% onwards)
Strength of Entrepreneur and Team 𝑤𝑖=1 𝑝𝑖=1 𝐹𝑖=1 = 𝑤𝑖=1 ∗ 𝑝𝑖=1
Size of the Opportunity 𝑤𝑖=2 𝑝𝑖=2 𝐹𝑖=2 = 𝑤𝑖=2 ∗ 𝑝𝑖=2
Product/Technology 𝑤𝑖=3 𝑝𝑖=3 𝐹𝑖=3 = 𝑤𝑖=3 ∗ 𝑝𝑖=3
Competitive Environment 𝑤𝑖=4 𝑝𝑖=4 𝐹𝑖=4 = 𝑤𝑖=4 ∗ 𝑝𝑖=4
Marketing/Sales/Partnerships 𝑤𝑖=5 𝑝𝑖=5 𝐹𝑖=5 = 𝑤𝑖=5 ∗ 𝑝𝑖=5
Need for Additional Investment 𝑤𝑖=6 𝑝𝑖=6 𝐹𝑖=6 = 𝑤𝑖=6 ∗ 𝑝𝑖=6
Other factors 𝑤𝑖=7 𝑝𝑖=7 𝐹𝑖=7 = 𝑤𝑖=7 ∗ 𝑝𝑖=7
7
Total
∑ 𝑤𝑖 ∗ 𝑝 𝑖
𝑖=1
To fully understand what the target company weight means, let’s imagine a target company that
has developed a product using a patented technology that makes it a much better and attractive
product than the ones from the set of comparable startups. In this case, the weight pi=3 should be
higher than 100%, which would refer to the average of theset of companies chosen. On the contrary,
if there is one aspect in which the target company performs at a lower level than the comparable
companies, the corresponding weight pi should be lower than 100%.
Finally, taking the average pre-money valuation, the critical factors and its weights, thefollowing
formula can be easily inferred:
𝑇𝑎𝑟𝑔𝑒𝑡 𝐶𝑜𝑚𝑝𝑜𝑎𝑛𝑦 𝑃𝑟𝑒 𝑚𝑜𝑛𝑒𝑦 𝑉𝑎𝑙𝑢𝑎𝑡𝑖𝑜𝑛 = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑃𝑒𝑒𝑟 𝑉𝑎𝑙𝑢𝑎𝑡𝑖𝑜𝑛 ∗ ∑ 𝑤𝑖 ∗ 𝑝𝑖

𝑖=1
To summarize, the Scorecard Method is aimed at pre revenue startups in the valuationrange of
$1m and $2.5m. Again, the main limitation of the Scorecard Method is its high level of subjectivity,
43
which allows the investor a high level of personalization, and the fact of having to obtain data about
pre-money valuations, which can be very challenging as it does not tend to be public.
4.6.10 The Risk Factor Summation

The Risk Factor Summation is also another valuation approach aimed at early-stage startups. The
method uses a base-value of a comparable companies to value the startupand then adjusted this base-
value for 12 standard risk factors. It is structured in a very similar way to the Scorecard Method.
First of all, finding comparable startups that share similar characteristics (i.e., industry,stage,
location) and the compute the median pre-money valuation of the set of companies chosen. The
average pre money peer valuation is known as base-value. Secondly, assesthe 12 risk factors, which
are related to political and market, management quality or levelof technology development as well
as legal framework or bran reputation, among others:
Comparison Factor
1. Risk of the Management 7. Risk of the Management
2. Stage of the business 8. Risk of Technology
3. Political risk 9. Risk of Litigation
4. Supply chain or manufacturing risk 10. International risk
5. Sales and marketing risk 11. Risk of Reputation
6. Capital raising risk 12. Exit value risk
Table 4: The 12 Risk Factors for the Risk Factor Summation
MethodSource: Own elaboration and Ohio
TechAngels
Now that the twelve risk factors are defined, it is time to assign a score to each of them,ranging from
-2 to +2, which adds or deducts depending on the positive and negative risks, following the
framework of the table below:
44
Rating Risk Rationale Adjustment to Pre-Money Valuation
+2 Extremely Positive Add $500,000
+1 Positive Add $250,000
0 Neutral Add/Minus 0
-1 Negative Minus $250,000
-2 Extremely Negative Minus $500,000
Table: Score weights for the Risk Factor Summation Method
Source: valuation of startup (thesis)
Following the logic of the two previous tables, the average pre-money valuation of
thecomparable startups is positively adjusted for risks with positive scores (increasing
the valuation by $250k for every +1), and it is negatively adjusted for risks with negative
grades following the same logic. The main advantage of Risk Factor Summation is that
this method forces investors to consider important external factors of risks that would
havenot been considered otherwise. The downside is that this also implies an increase
in the subjectivity and the complexity of the method.
The Risk Factor Summation approach lead also to a high level of subjectivity, but at the same
times it ensures that the investor assess both external and internal risks of the startup. In
addition, this method also faces the problem of gathering financial information(i.e., base-value
for peers) that can be hard to obtain due to its privacy
4.6.11 Cost-to-Duplicate
The Cost-to-Duplicate valuation approach consists of calculating how much it would cost to
build another company exactly like the target one from scratch, so the investors would never pay
more than what it would cost to duplicate it. It is a very objective method,as it allows investors to
look at real expense records of the company.
However, the methodology consists of calculating the fair value of the startup by considering its
45
physical assets. In other words, it does not take into account intangible assets business model, brand
recognition or intellectual property. Another drawback is that it does not consider the potential
growth of the company, which is a key characteristic of a startup. Consequently, this valuation
method usually leads to lower enterprise value compared to other techniques.
46
Chapter:5 LITRATURE REVIEW
TITLE: The Indian startup ecosystem: Drivers, challenges and pillars of support
AUTHOR: SABRINA KORRECK
Description
In 2019, there were more than 50,000 startups in India, and it is anticipated that by 2025, this
ecosystem will have grown significantly. Economic reforms, a wealth of tech expertise, shifting
perspectives on entrepreneurship, government backing, and greater investor interest are all credited
with the growth. But problems including a lack of qualified talent, red tape, fierce competition, and
financial limitations still exist. The paper highlights the need for continuous government support,
luring additional investors, promoting incubators and accelerators, and facilitating networking and
mentorship opportunities in order to further strengthen the ecosystem. The Indian startup ecosystem
has the capacity to grow into a dynamic global force, thus overcoming these obstacles is essential for
it to do so.
TITLE: Startup Valuation: Theories, Models, and Future

AUTHOR: Murat Akkaya
Description
This Paper examines startup valuation techniques. Startup refers to the procedure for starting a task or
action. In contemporary economies, startups play a significant and important role as young, innovative
businesses. Startups are new or young businesses that are battling to expand and reach their potential.
Choosing a firm's valuation is one of the most difficult decisions in corporate finance. Evaluating
businesses that don't make money is much harder. The valuation of a startup is comparable to the
appraisal of a particular table. At this point, the valuation is fairly significant. Since a startup is a
business, it is important to consider the strategies created especially for startups. Nasser (2016)
identifies nine various ways of appraisal to establish pre-money valuation; Berkus Method, Risk
Factor Summation Method, Scorecard Valuation Method, Comparable Transactions Method, Book
47
Value Method, Liquidation Value Method, Discounted Cash Flow Method, First Chicago Method,
and Venture Capital Method. Traditional valuation methods are also applicable in valuation.
TITLE: Understanding Startup Valuation and its Impact on Startup Ecosystem

AUTHOR: Ramesh Menon and Leena James
Description
The article explores the crucial part that startups play in stimulating innovation and job growth at the
global level. The failure rate for businesses remains high at 90% despite government efforts to assist
them, which presents difficulties for the ecosystem. Alternative funding sources, such as venture
capitalists and angel investors, are now essential for facilitating access to the capital required for
successful startup operations. It's interesting that many firms are evaluated on their promise rather than
long-term viability, which has resulted in the rise of unicorns without immediate financial success.
TITLE: How to value a start-up business

AUTHOR: PwC Deals insight
Description
The article addresses many approaches, such as Discounted Cash Flow (DCF), Comparable Analysis,
and Pre-money Valuation, for valuing a startup company. It draws attention to the difficulties in
valuing startups, including the scarcity of historical data, the unpredictability of future cash flows, and
the significance of qualitative considerations. The best appropriate strategy to valuing businesses relies
on the particular circumstances of each startup, the conclusion adds, and there is no one methodology
that works for all startups.
TITLE: Methods for evaluating Innovation from Ideas to Startups

AUTHOR: Sol Inventum OÜ
Description
The numerous techniques for assessing innovation, from the early stages of ideation to startup
development, are covered in the article. It highlights the requirement of thorough assessments to spot
48
possible opportunities early on and the significance of execution in transforming ideas into profitable
assets. The advantages of structured evaluation are discussed, including risk reduction and the capacity
for wise decision-making. assessment techniques are divided into four groups in the article: automated
assessment methods, quick evaluation techniques, analytical evaluation techniques, and formal
evaluation techniques. The descriptions of each category provide examples of its typical evaluation
techniques.
Automated methods involve low-investment evaluations, such as questionnaires and checklist-based

filters, to streamline the innovation scouting process. Fast evaluation methods, like "wisdom of the
crowds" and expert panels, prioritize speed and broad audience opinions. Analytical methods are more
in-depth and are applied for higher-impact decisions, involving criteria set by domain experts, business
experts, and innovation scouts. Formal evaluation methods include financial models like the Venture
Capital Method and Discounted Cash Flow, often used for later-stage startups.
TITLE: Startup Company Valuation: The State of Art and Future Trends
AUTHOR: Damiano Montani and Daniele Gervasio
Descripitaion
The article discusses numerous approaches to startup company valuation and stresses that there is no
one-size-fits-all approach. It begins by outlining the many classifications of startup valuations, such
as pre-money, post-money, and exit valuations. Discounted Cash Flow (DCF), comparable analysis,
relative value, and expert opinion are some of the approaches for valuation that are covered. Due to
the scarcity of historical data and the unreliability of some procedures, the authors admit the difficulties
in applying certain techniques to startups. They stress the common use of comparables analysis while
maintaining that DCF is the most accurate method. In the article's conclusion, it is predicted that future
startup valuations will trend toward more complex techniques, such as DCF and comparables analysis,
and a greater emphasis on qualitative variables. Overall, the article offers insightful information about
the complexities of valuing startup companies and the need for careful consideration of various factors
when determining their worth.
TITLE: Valuing start-ups – Selected approaches and their modification based on

external factors
AUTHOR: Martina Skalická and Marek Zinecker
49
Description
The essay examines numerous techniques for valuing startups and underlines the lack of a strategy
that is always the best option because each firm has a unique setting. Pre-money, post-money, and exit
valuations are the three different forms of startup valuations that are covered. Discounted Cash Flow
(DCF), comparables analysis, relative value, and expert opinion are some of the techniques covered.
The author also emphasizes how these approaches can be modified to take into account outside
variables like industry risk and stage of growth.
The stage of development, market opportunity, level of competition, team strength, product quality,
and traction are just a few of the variables the article names as influencing startup valuation. It
reiterates in its conclusion that startup valuation is a complex process that calls for taking into account
a range of variables for an exhaustive evaluation.
The author chooses DCF as the most accurate method while acknowledging the difficulties in using
other methods due to the insufficient data at the initial period. Despite its possible unreliability, the
text acknowledges the popularity of comparables analysis. Although it might not be accurate, the
relative valuation approach is appreciated for its simplicity. The significance of expert opinion as a
tool is acknowledged, yet subjectivity is still a problem.
TITLE: Startup valuation by venture capitalists: An empirical study

AUTHOR: Tarek Miloud, Arild Aspelund and Mathieu Cabrol
Description
Based on research of 1,157 VC-backed firms, the article explores the important variables influencing
venture capitalists' (VCs') valuation of startups. In establishing the startup's valuation, it emphasizes
the importance of the startup's stage of development, sector, financial performance, and management
team caliber.
The most important element turns out to be the stage of development, with seed-stage businesses being
valued at lower revenue multiples than their later-stage counterparts. The startup's operating sector has
an impact on valuation as well, with high-growth sectors demanding greater multiples.
Startups are valued differently depending on their financial health and the caliber of their management
teams; those with solid finances and seasoned teams are valued higher than those with weaker health
and inexperienced teams.
50
The article emphasizes how important these results are for both entrepreneurs and VCs. To obtain
better values, startups are recommended to concentrate on building sound financial performance and
capable management teams. On the other hand, while making investment decisions, VCs should take
the startup's stage of development, industry, and financial performance into account.
Additional topics covered in the article include the average valuation of VC-backed firms ($10
million), the importance of the study's findings for well-informed decision-making in the startup and
VC ecosystems, and the larger impact of stage of development over industry on valuation.
Overall, the study offers insightful information about the variables affecting startup valuations, aiding
startups and VCs in formulating their growth and investment strategies.
TITLE: Study of Challenges Faced by Startup Industries

AUTHOR: Anurag Mathur and Himanshu Agarwal
Description
Lack of funding opportunities due to restricted access to angel and venture capital investments is one
of the major issues facing Indian businesses. Another challenge is the fierce rivalry on the Indian
market, where many entrepreneurs are vying for a piece of the action. Startups must navigate the
complex regulatory framework, which makes things much more difficult. Inadequate infrastructure is
another issue startups frequently face, hurting critical services like power and internet connectivity.
The article emphasizes how the difficulties experienced by startups differ according to their stage of
development. While later-stage businesses must contend with competition from established firms in
the industry, early-stage entrepreneurs struggle with finance.
The authors stress how crucial it is for companies to recognize these difficulties and devise plans to
deal with them. To create an atmosphere that would encourage their development, policymakers are
asked to increase assistance for startups and streamline regulatory procedures.
The severity of the financial dilemma and the impact of government rules, notably those pertaining to
taxation and intellectual property protection, are highlighted by further points in the essay. The authors
also point out that entrepreneurs in other developing nations face many of the same difficulties as those
faced by Indian startups. The authors also expect that these difficulties could worsen in the future as
the Indian economy grows more competitive.
51
In conclusion, the study provides a thorough overview of the issues faced by startup sectors in India,
offering useful insights for businesses and policymakers to successfully address and overcome these
impediments.
TITLE: Growth of Startup Ecosystems in India

AUTHOR: Surbhi Jain
Description
The rapid growth of startup ecosystems in India is a topic covered in the essay "Growth of Startup
Ecosystems in India" by David David and Saurabh Gupta. The authors examine the important elements
influencing this rise using a qualitative research methodology. These elements include favorable
government policies, increasing access to venture capital, and the expansion of the Indian economy as
a whole.
The authors emphasize the crucial role that government programs, including the Startup India
program, have had in fostering and sustaining the startup ecosystem. Additionally, the increased
accessibility of venture capital has facilitated companies' growth and development by making it
simpler for them to obtain investment. Because it has provided a sizable client base for these firms,
the rising Indian economy has also helped startup ecosystems expand.
Even though the growth has been impressive, the authors point out that it has not been uniformly
distributed, with some cities—most notably Bangalore and Mumbai—having more developed startup
ecosystems than others.
The article underlines that continuous economic growth and government measures will promote the
upward trajectory of startup ecosystems in India. The authors do, however, issue a warning that
tackling issues like financial limitations and the complex regulatory framework will be essential for
ongoing growth.
The article also discusses how the startup ecosystem in India is still developing and how it is
concentrated in a few places. To successfully promote and foster the expansion of startup ecosystems
across the nation, policymakers and investors are urged to take the findings into consideration. Overall,
the study offers insightful information about the vibrant startup ecosystems in India, assisting
stakeholders in formulating policies and choosing investments to support and sustain this growth.
52
Chapter:6 RESEARCH METHODOLOGY
To achieve the research objectives, this study will adopt a mixed-methods approach. It will involve an
extensive literature review of academic papers, industry reports, and relevant publications to establish
a comprehensive foundation for the analysis. Additionally, data will be collected through surveys and
interviews with key stakeholders, including startup founders, investors, and valuation experts.
I have collected primary data related to valuation methods with interview with various founders and
investors (via Google Meet) and with help of questionnaire I have gain insights from entrepreneur
regarding challenges they face in fundraising and at initial stage of their startup.
After applying qualitive measures data collected will be analysed and interpreted to provide analytical
aspects to findings.
6.1 HYPOTHESIS
1
H1 (Alternative Hypothesis): Startups that encounter challenges in determining their valuation during
fundraising rounds are more likely to seek external assistance from financial advisors or consultants
to navigate the valuation process effectively.
H0 (Null Hypothesis): There is no significant relationship between the challenges faced in

determining startup valuation during fundraising rounds and seeking external assistance from
financial advisors or consultants.
2
H1: Startups face challenges in valuing their business due to limited historical data, uncertainty in
future cash flows, and lack of comparables.
H0: Startups do not encounter significant challenges in valuing their business, and the valuation
process is straightforward.
53
6.2 Research design

The research design for this study will adopt a mixed-methods approach, combining both quantitative
and qualitative data collection methods. Surveys will be distributed to startup founders to gather
quantitative data on valuation impact, factors influencing valuation, challenges, and methodologies.
Additionally, in-depth interviews with startup founders, investors, and financial advisors will provide
qualitative insights into decision-making and risk management during valuation. Thematic and
statistical analysis will be applied to the data to identify trends, relationships, and significant factors
affecting startup valuation. Ethical considerations will ensure participant confidentiality, and the
study's limitations will be acknowledged. The research will offer valuable insights and
recommendations for startups, investors, and policymakers to enhance the valuation process.
6.3 Source of data

Questionnaires: A structured questionnaire was designed and distributed to startup founders and
entrepreneurs to gather quantitative data on their experiences with startup valuation, challenges
faced, and decision-making processes.
Interviews: In-depth interviews were conducted with a selected group of startup founders and
industry experts to obtain qualitative insights, opinions, and experiences related to startup valuation
and the factors influencing it.
Secondary Sources: Relevant literature, academic papers, industry reports, and online sources were
reviewed to gain a comprehensive understanding of startup valuation methodologies, trends, and
challenges.
6.4 Sampling method

Convenience Sampling: For the questionnaire and online surveys, participants were selected based on
their accessibility and availability. Startup founders and entrepreneurs who were willing to participate
and had easy access to the survey were included in the sample.
Purposive Sampling: For the in-depth interviews, a purposive sampling approach was employed to
select participants who had significant expertise and experience in the field of startup valuation.
Industry experts, successful startup founders, and professionals with knowledge of startup funding and
valuation were purposively selected to provide valuable insights.
The combination of convenience and purposive sampling allowed for a practical and focused
approach to gather data from relevant stakeholders in the startup ecosystem. It helped ensure that the
54
research obtained both broad perspectives from a larger sample and in-depth insights from key
informants, resulting in a comprehensive analysis of the research questions.
6.5 Method of data collection
Questionnaires: Structured questionnaires will be distributed to startup founders and entrepreneurs to

gather quantitative data on their challenges, valuation methods, and decision-making processes. The
questionnaires will be designed to be easy to understand and answer, allowing for efficient data
collection from a larger sample.
Interviews: In-depth interviews will be conducted with a select group of startup founders to gather
qualitative insights into their experiences and perspectives related to startup valuation and decision-
making. The interviews will provide a more detailed and nuanced understanding of the challenges and
factors influencing valuation.
6.6 Questionnaire
55
5. Location:
56
57
58
59
60
Interview:
1. How does valuation impact your decision-making in the early stages of your startup?
2. What factors influence the valuation of your startup the most?
3. What challenges do you face in valuing your startup, and are there any interesting valuation
trends or changes you find relevant?
4. What methodology or approach do you use to value your startup, and what factors or data
points are considered?
5. What risks and challenges do you encounter in the valuation process, and how do you
address them?
61
Chapter:7 DATA ANALYSIS AND

INTERPRETATIONS
Duration of Startups:
 The majority of the respondents (37.8%) indicated that their startups have been in
operation for less than 1 year, suggesting a significant number of early-stage ventures.
 Around 27% of the startups have been operating for 1-3 years, indicating a sizeable
proportion in the early growth phase.
 Approximately 17.6% of the startups have been operating for 3-5 years, indicating a
moderate number in the mid-stage of development.
62
 Similarly, 17.6% of the startups have been in operation for more than 5 years,
suggesting a notable number of well-established ventures
Biggest Challenges Faced During Initial Setup:
Limited funding and financial resources were the most prevalent challenge, reported by 29.4%
of the respondents. This indicates that access to capital is a major hurdle for startups during
their early stages.
Market competition and entry barriers were the second most significant challenge, reported
by 17.6% of the respondents. This highlights the competitive nature of the market and the
difficulties in entering established industries.
Finding the right team and talent was also identified as a critical challenge by 17.6% of the
respondents, emphasizing the importance of human capital in a startup's success.
Legal and regulatory complexities were reported as a substantial challenge by 17.6% of the
respondents, suggesting that compliance and navigating legal hurdles are significant concerns
for startups.
Importance of KPIs in Measuring Startup's Growth:
63
The respondents' ratings indicate varying degrees of importance for different Key Performance
Indicators (KPIs) used to measure startup growth.
Monthly Active Users (MAU) and Customer Acquisition Cost were not considered important by most
respondents, suggesting that these KPIs may not be the primary focus of their growth measurement.
On the other hand, Customer Lifetime Value (CLV) and Revenue Growth Rate were rated as very
important by the majority, indicating a focus on long-term customer value and revenue generation.
Gross Profit Margin was also rated highly, indicating that profitability is a critical metric for startup
growth.
Primary funding sources for your startup
The primary funding methods mentioned by respondents were Bank loan and bootstrapping
(using personal funds). However, to a lesser extent, angel investors and venture capital were
also cited.
64
As per data given there is 28% responded rely on bank loans follow up by 26% bootstrapping.
The most challenging aspects of fundraising were uncertain investor response to pitch and
limited access to potential investors, both receiving an average difficulty rating of 4. Securing
meetings with investors and facing investor rejection were also considered challenging
(average rating of 3).
Challenges found in communicating startup proposition.
65
Respondents mentioned demonstrating market potential is being barrier in proportion. While

presenting complex ideas are also a challenge which has been found secondly by responded.
This indicates that effective communication and pitching skills are critical in attracting
investors.
External assistance
66
This data suggests that a significant portion of the respondents (54%) have recognized the
importance and value of seeking external advisory when it comes to valuation and fundraising
for their startups. Seeking external advice from financial advisors or consultants can be
beneficial for startups, especially during fundraising rounds, as it can help them navigate the
complex process of determining the startup's valuation and attracting potential investors.
The respondents who answered "no" may have different reasons for not seeking external
advisory. It is possible that they have enough in-house expertise or resources to handle
valuation and fundraising matters independently. Alternatively, some of them may prefer to
rely on their own networks and experiences to make decisions related to valuation and
fundraising.
Analysis of the data gathered by interview
Question 1: How does valuation Question 2: What factors influence Question 3: What challenges do you face in Question 4: What methodology or Question 5: What risks and
impact your decision-making in the valuation of your startup the valuing your startup, and are there any approach do you use to value your challenges do you encounter in
the early stages of your startup? most? interesting valuation trends or changes you startup, and what factors or data the valuation process, and how
SR.NO DATE NAME find relevant? points are considered do you address them?
valuation is important in the
beginning. It establishes the value of
company and the amount of revenue and growth are important factor. uncertainties in predicting future
ownership which one might have to cash flows, so we conduct
1 1 plus consultency give up to attract investors. historical data Discounted cash flow sensitivity analysis
A higher valuation might give
confidence, but it also means one lack of past finacial data and few comparable updated with market trends and
2 dscribe need to meet higher expectations. revenue, technology adaption,team companies comparable analysis reassess regularly."
higher value = take more chances and
invest in growth prospects,a lower combination of all methods as every
3 evify valuation= leaner and more focused. revenue,uniqueness of product investors expectations method's outcome is almost same value matrix
In the early stage of a startup, hiring
the right talent is one of the most
important factors of the valuation.
Then comes the negotiation for
4 influncer india potential clients
Valuation impacts credibility. A strong
valuation can attract more investors
It also affects our ability to negotiate market condition,hype in industry the Valuing intangible assets like
5 nepra terms with investors. valuation can go up external factors Discounted cash flow brand reputation
early stage of startup should not be
focused on valuation it impacts
6 RR-GTM advesrly . team,unique product,market capture,IP find the right apporch to value comparble third-party expertise
growth potential and market
7 seekthem Value affects fundraising. quailty and experince you provide lack of knowledge not particulare base on revenue share
valuation might be challenging. In
order to avoid overvaluing or
undervaluing startup, one need to
take into account how it can affect
8 uraban naps upcoming investment round. tangible model,scale of operation,patent future projection by esimating growth potential multipling factor third-party expertise
Valuation impacts how much capital
we need to raise. We want to ensure
we have enough funds to reach
significant milestones without giving
9 Delbird up too much equity too early. market size,customer acquation , revenue,tanible
hardmodel
to measure growth potential revenue multiplier assess different scenarios
67
Interpretation of the Data:
1. Impact of Valuation on Decision-Making:
The startups' responses indicate that valuation holds significant importance in the early
stages. It serves as a crucial parameter to determine a company's value and the amount of
ownership founders may need to relinquish to attract investors. A higher valuation can boost
confidence, but it also raises expectations and responsibilities. On the other hand, a lower
valuation might lead to a more focused approach. Overall, valuation affects how startups
strategize their growth and investment decisions.
2. Factors Influencing Startup Valuation:
The most influential factors impacting startup valuation include revenue generation,
technology adoption, Intellectual property, the uniqueness of the product or service, and the
strength of the team. These factors are crucial for investors in assessing the startup's growth
potential and market position. It is noteworthy that past financial data and comparable
companies are also essential considerations, though some startups faced challenges in
obtaining such data in the early stages.
3. Challenges in Valuing Startups:
Startups encounter several challenges in the valuation process. Lack of historical financial
data and limited comparable companies make it difficult to establish an accurate valuation.
Additionally, meeting investor expectations poses a challenge, as different stakeholders may
have varied perspectives on the startup's worth. However, startups are finding solutions by
using a combination of valuation methods to arrive at more reliable conclusions.
4. Valuation Methodology Employed:
The startups reported using various approaches to value their businesses. The most common
methods include discounted cash flow analysis and comparable analysis. By combining
multiple valuation techniques, startups aim to ensure that the outcomes are consistent and
reflective of their actual value. Regular reassessment and keeping up with market trends are
also highlighted as essential practices.
5. Risks and Challenges in Valuation:
68
Startups face uncertainties in predicting future cash flows, which poses risks during the
valuation process. Additionally, valuing intangible assets, such as brand reputation, can be
challenging. To address these risks, sensitivity analysis is conducted to understand the impact
of changing variables on the valuation. Seeking third-party expertise is also a common
approach to gain an unbiased assessment.
Overall, the data shows that valuation significantly impacts early-stage startup decision-
making. Founders need to strike a balance between a confident valuation that attracts investors
and the realistic expectations it brings. Revenue, technology adoption, team strength, and
uniqueness of the product are critical factors in determining valuation. Despite challenges like
limited financial data and investor expectations, startups are employing various
methodologies and seeking external expertise to ensure a more accurate and informed
valuation process. Understanding the intricacies of startup valuation is essential for startups
to secure appropriate funding and navigate their growth journey effectively.
69
Chapter:8 FINDING AND SUGGESTIONS
8.1 Findings
The findings from the data analysis reveal several significant insights into the challenges and
dynamics of startups. The majority of the respondents indicated that their startups have been
operating for less than 1 year, emphasizing the prevalence of early-stage ventures in the
dataset. This indicates a vibrant entrepreneurial ecosystem with a continuous influx of new
startups.
Limited funding and financial resources emerged as the most prevalent challenge faced by
startups during their initial setup. This highlights the crucial need for access to capital in the
early stages of a business. Insufficient funding can hinder growth, product development, and
market penetration, making it imperative for entrepreneurs to explore diverse funding sources
to secure the necessary resources.
Market competition and entry barriers were identified as the second most significant
challenge. This underscores the highly competitive nature of markets and the difficulties
startups face when trying to establish their presence amidst established players.
Differentiation, innovation, and unique value propositions are key strategies that startups
should adopt to overcome these challenges and gain a competitive edge.
Finding the right team and talent also emerged as a critical challenge. Human capital is crucial
for a startup's success, and recruiting skilled individuals who align with the company's vision
is essential for driving innovation and achieving sustainable growth.
The importance of Key Performance Indicators (KPIs) in measuring startup growth was
evident from the respondents' ratings. Customer Lifetime Value (CLV) and Revenue Growth
Rate were rated as very important, emphasizing a focus on long-term customer value and
revenue generation. Gross Profit Margin also received high ratings, indicating the significance
of profitability as a critical metric for startup growth.
Moreover, the data highlighted that 54% of the respondents sought external advisory for
valuation and fundraising, indicating the recognition of the value that financial advisors or
consultants can bring to the process. Seeking external expertise can help startups navigate the
complexities of valuation and secure necessary funding more effectively.
70
In conclusion, the data provides valuable insights into the challenges faced by startups during
their early stages and the significance of strategic decision-making, funding, talent
acquisition, and KPIs in driving growth. By addressing these challenges proactively and
seeking expert guidance, startups can position themselves for success in the dynamic and
competitive startup ecosystem.
8.2 Suggestions
 Diversify Funding Sources: Startups should explore multiple funding options beyond
traditional bank loans and bootstrapping. Angel investors, venture capital, and
crowdfunding platforms can offer additional financial resources and networking
opportunities.
 Strengthen Market Differentiation: To overcome market competition and entry

barriers, startups must focus on developing unique value propositions, innovative
products, and services that set them apart from established players.
 Build a Strong Team: Finding and retaining the right talent is crucial for a startup's
success. Entrepreneurs should prioritize building a skilled and motivated team that
aligns with the company's vision and values.
 Prioritize Key Performance Indicators (KPIs): Focus on important KPIs such as

Customer Lifetime Value (CLV) and Revenue Growth Rate to gauge business
performance accurately and make data-driven decisions.
 Seek External Valuation Expertise: When facing challenges in determining startup

valuation, seeking assistance from financial advisors or consultants can lead to more
accurate valuations and better negotiation outcomes during fundraising rounds.
71
Chapter:9 CONCLUSION
The comprehensive analysis of emerging trends in startup valuation methods and fundraising
challenges provides valuable insights into the complex nature of startup financing and growth. The
data reveals that limited funding and financial resources are the most prevalent challenges faced by
startups in their early stages, underscoring the critical need for access to capital. Additionally, market
competition, finding the right team and talent, and legal complexities are significant hurdles that
startups must navigate. The study emphasizes the importance of Key Performance Indicators (KPIs)
in measuring startup growth, with Customer Lifetime Value (CLV) and Revenue Growth Rate being
highly rated. Moreover, the data highlights the value of seeking external advisory for valuation and
fundraising. By understanding these challenges and leveraging appropriate methodologies and expert
guidance, startups can position themselves for success and sustainable growth in the dynamic startup
ecosystem.
72
Chapter:10 REFERNCES
References
adams, B. (2020). business valuation book value. Retrieved from businesstown.com.
Adams., B. (2020). Business Valuation Using Book Value. Retrieved from Businesstown.com.
Amit Balhara, M. b. (2022). Startup; Vakuation & Significance . Mumbai: GAA Advisory.
ChatGPT. (2023). Retrieved from ChatGPT: https://openai.com/blog/chatgpt
Damodaran, A. (2009). Valuing young, startup and growth companies: estimation issues and valuation
challenges. New york university.
Googlr Bard. (2023). Retrieved from Googlr Bard:

https://r.search.yahoo.com/_ylt=Awr1Sa6JZ8Fk5OAZ.oi7HAx.;_ylu=Y29sbwNzZzMEcG9zAzEEdnRp
ZAMEc2VjA3Ny/RV=2/RE=1690425354/RO=10/RU=https%3a%2f%2fbard.google.com%2f/RK=2/RS
=6aU.XuEgCLSReXWoVlCo8pIzNoo-
INC42, B. T. (2022, feb 22). 12 Options For Startup Funding In India. Retrieved from INC42:
https://inc42.com/resources/12-options-for-startup-funding-in-india/amp/
Mun., J. (2002). Real Options Analysis. Tools and Techniques for Valuing Strategic Investments and Decisions. .
Prasad Kodukula, C. P. (2006). Project Valuation Using Real Options.
sanchez, r. (2022). valuation of startup. paris: thesies.
Startup Blink Team. (2023). The Startup Ecosystem of India. Retrieved from Startup Blink:
https://www.startupblink.com/startup-ecosystem/india
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SUMMER INTERNSHIP REPORT | 2023

Summer Internship Project on

"Navigating the Dynamic Startup Ecosystem: A Comprehensive

Submitted By: Vrushti Papoli

Roll no: 122068

Under the guidance of:

B.K school of business management

Department of Gujarat university,

Gujarat university, ahemdabad-380009

Chief Marketing Officer

At Delbird PVT LTD, Ahmedabad

CERTIFICATE OF COMPLETION (COLLEGE)

B. K. SCHOOL OF BUSINESS MANAGEMENT

Dr. Prateek Kanchan Gujarat University Campus,

Dr. Nilam Panchal

Date: 26s July 2023

CERTIFICATE OF COMPLETION (COMPANY)

I, Vrushti Papoli– the student of B. K. School of Professional and Management Studies,

Date: Vrushti Papoli

MBA full time

I perceive this opportunity as a big milestone in my career development. I will strive to

MBA Full Time

B.K. School of Professional and Management Studies,

4.2 Characteristics .................................................................................................................................. 20

1.2 SIGNIFICATION OF THE STUDY

1.3 STATEMENT OF PROBLEM

1.4 OBJECTIVE OF STUDY

By performing an extensive investigation of the new developments in startup valuation techniques

1.5 SCOPE OF THE STUDY

1.6 LIMITATIONS OF STUDY

Chapter: 2 INDUSTRY OVERVIEW

2.1 The logistics sector in India

2.2 The expansion of the logistics sector

in expanding company opportunities as well as helping to increase the efficiency of the

2.3 For-profit business opportunities

2.4 The logistics industry in the nation's future

CHAPTER: 3 COMPANY PROFILE

“Trusted Delivery Partner is just a

3.2 Mission & Vision

3.3 SWOT Analysis of Delbird Logistics

Prices starts from

Delbird is Serving in diverse Industries

3.5 Organizational Structure

 Dedication to Customers: We are unwavering in our commitment to meeting and exceeding

3.8 The Work culture

Chapter: 4 THEORETICAL FRAMEWORKS

4.1 What is startup?

4.3 Startup ecosystem India

4.4 Stages of startup

4.5 Financing a startup

Platforms & Angel Networks

Popular platforms include LetsVenture, Venture Catalysts, and AngelList.

Venture Capital Funds

Corporate Venture Capital

Venture Debt Funds

Government Grants & Funds

Incubators & Accelerators

are a component of big businesses or technological giants. Y Combinator, GSF Accelerator,

Crowdfunding is an additional, less well-liked method of startup fundraising. On a platform, a group