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Ankur's avatar

Very interesting posts, this one and the previous one, Nikhil !

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Vishnu Rajanikanth's avatar

Hi Nikhil,

Thanks for the post, it feels like you are bringing business valuation back to the basics.

EBITA and FCF are for sure the key metrics of a healthy business.

The only problem is - what do they say about the future ? Valuation of startups by Private investors is supposed to indicate a future value of the business, as valuing them on the current numbers (Published or Private) does not reflect what they could be .

This is very difficult to get right as it is, maybe made worse in the past by all the cheap capital.

With the current levels of cost of capital, Do you see this changing ?

How about setting up a roadmap of future cashflow and net profit (Goals) with the startups founders and make valuation a dependent function of the same and have the valuation change periodically ( capital raise or not) as a way to enforce the goals.

Even if this was done somehow, how do you factor pivots and unpredictability of asset value for the investors.

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