Dubai: By offering equity in crowdfunded ventures, the stakes have indeed been pushed higher for investors and the businesses alike. But what would constitute a proper valuation for a business that is still in the very early stage of its operations?
“Proper valuations in all start-ups are difficult for reasons that are well-known,” said Vishnu Deuskar, managing director at Salvus Advisors JLT, a specialist consultancy. “Inevitably, a large element of subjectivity and faith comes in as the probability of success is low and dependent on the entrepreneurs ability to execute, even if the underlying business proposition is good.
“It is tougher for investors to get proper valuations in crowdfunding due to the large number of investors who cannot individually access information or do due-diligence in order to create their own valuations or negotiate the final price.”