Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

For later-stage startups with revenue, one can use the financial projections to estimate the company’s valuation for fundraising purposes. 

Discounted cash flows, called the DCF method, values the company based on future cash flow projections. 

This weights the value of the company on future revenues rather than today’s revenues.

The DCF method is purely a financial valuation method and does not take into account other factors such as the team, intellectual property, or sales activities that have not yet been realized with cash flows.

Your financial projections should have the key elements including projected cash flows, a chosen discount factor, and a net present valuation of the free cash flows to generate the DCF valuation.

It’s just one more valuation tool. Predicting cash flows in the future can be difficult given the sales process is not fully in your control.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.