Startup Capitalization
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Startup capitalization is a complex topic because there are no precise rules for determining it.
Firstly, startup capitalization is typically calculated before the company even begins generating revenue, let alone profit, so it relies on some projection of future earnings.
Secondly, startup capitalization is tied to investments made by investors, whose goal is often to sell their stake to subsequent investors at a higher price.
Consequently, capitalization is subject to manipulation. For this reason, at ueCalc.com, capitalization is calculated as the EBITDA from the last year of the startup’s financial plan multiplied by a multiplier, which depends on the type of business—for example, for AI startups in the US, it can reach as high as 20.
However, during the investment stage, capitalization is typically calculated based on the investment amount and the share the investor receives at that stage.
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