Arihant EdTech has started a web portal for online education and is at an early stage of business. It desires to value its business. List down the methods it can adopt for valuation along with a short write up on each.

Answer 4(b) Arihant EdTech is a start-up. There are several methods available to it so as to value its business. A list of the methods along with brief description is as under: Income approach: It is a valuation approach that converts maintainable or future amounts to a single current amount. The value measurement is determined on the basis of the value indicated by current market expectations about those future amounts. Cost approach: It is a validation approach that reflects the amount that would be required currently to replace the service capacity of an asset. A valuer applies cost approach in case income approach cannot be used. Venture Capital method: Venture capital method is one of the globally acceptable methodology in estimating the value of a start-up. In this method the value of start-up is done from the venture capital point of view. It indicates the value of pre-money ventures by following the process that VCs go through where, they exit an investment within 3 to 7 years. First Chicago method: The first Chicago method is one of the context specific valuation methodologies which consider pay outs to the investors during the holding period. This method takes into consideration three scenarios: success, failures and survival case and associate probability to each case to find weighted average price of start-up business. Adjusted Discounted Cash Flow method: This method is a scientific tool used to judge the value of start-up on the basis of its potential which is converted in the form of cash flow and adjusted with differential discount rates based upon the risk perception of a start-up entity. Rule of Thumb: Rule of thumb or benchmark indicator is used as a reasonable check against the values determined by the use of other valuation approaches in a valuation engagement. It is technically not a valuation method but still used as a rationality check against the values determined by use of other valuation approaches. Berkus method: According to super Angel investor Dave Berkus, the Berkus method "assigns a number, a financial valuation, to each major elements of risk faced by all young companies after crediting the entrepreneur the basic value for the quality and potential of the idea itself". The Berkus method uses both qualitative and quantitative factors for valuation. Scorecard Validation method: It is also known as Bill Payne Valuation method and is one of the most preferred methodologies used by the Angel investors. This method compares the start-up to other funded start-ups modifying the average valuation based on factors such as region, market and stage.