Valuation of Candidate Projects Financed by Crowdfunding

Document Type : Research Paper

Authors

1 Master of Financial Engineering, Science and Culture University

2 Associate professor at Allameh Tabataba’i University

Abstract

These days, financing for startups is of paramount challenges for entrepreneurs. Also, because of the risk of venture investments, financial institutions and banks often tend to be less willing to invest in these activities. Moreover, with the advent of social network and virtual communities , fundraising through crowdfunding is one of a new ways of attracting retail investors to financing for risky projects particularly startups . Therefore, estimating the required financial investment and consequently valuing startups is of crucial importance. This article introduces valuation methods for startups who are willing to finance through crowdfunding. In this article, according to the characteristics and the nature of the startups, two methods of Discounted Cash Flow in the income-driven approach and Black Scholes in the Real Option Valuation approach have been distinguished suitable to finance for an startup through crowdfunding . Comparing the results of these approaches, we can validate obtained valuation results. The proximity of the results of the two methods suggests an appropriate estimation of the value of the project under study.

Keywords

References

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Financial Management Strategy
Volume 7, Issue 2 - Serial Number 25
September 2019
Pages 33-59

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History

  • Receive Date: 04 October 2018
  • Revise Date: 18 January 2019
  • Accept Date: 21 January 2019

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