All terms
Valuation
The estimated worth of a company.
QUICK ANSWER
Valuation is the process of determining the economic value of a company, often used during fundraising or acquisitions.
In depth
Valuation represents what a company is worth at a given point in time and is a key factor during fundraising. It can be determined using methods such as revenue multiples, discounted cash flow, or comparable company analysis. For startups, valuation is often based on growth potential, market size, and traction rather than profitability. Valuation determines how much equity founders give up in exchange for capital. Higher valuations reduce dilution but must be justified by performance and future potential.