How startups make sure their price is right

Remember The Price is Right?

That game show was something of a childhood fascination of mine, especially on days when I’d call in sick and all I could do was huddle up on the sofa in a blanket and watch daytime television.

I still remember how intrigued I felt as the program’s former host, Bob Barker, would show contestants everyday items – blenders, washing machines, and refrigerators, for instance – and have them guess how much it was worth. As a kid, I had absolutely no idea what anything cost, so I was always amazed at the reveal. Who knew that household appliances could be so expensive?

Or is it cheap? I don’t know – I’m still at the stage where I’m shocked that a 200-liter fridge can go for almost US$1,000.

I have so many questions. / Image credit: Tech in Asia

Then I started writing about startups, and I would feel the same way whenever I’d see news about companies hitting millions or billions of dollars in valuation. Wow, that’s a big number and I never would’ve guessed it, but what does that mean? And what does it say about a business when its value is that high?

These are some of the questions that the Tech in Asia Explains team sought to answer in the latest episode on startup valuation. With the help of Openspace Ventures vice president Gervin Yang, Gobi Partners managing partner Kay-Mok Ku, and Funding Societies co-founder Kelvin Teo, we discuss what factors are considered when deciding on a startup’s valuation, how to do the math behind that “magic number,” and why it’s so important that founders get their valuations right.

With all the recent chatter about how a public listing could boost Grab and Gojek’s valuations by the billions and how startups like Oyo achieve staggering valuation numbers in such a short amount of time, it’s increasingly important that entrepreneurs know what they’re doing when they put a price on their businesses. Whether the number is too high or too low, inaccurately estimating a startup’s valuation could cost founders in the long run, after all.

So if you want to understand the art and science behind determining how much a startup is worth, you won’t want to miss Tech in Asia Explains: Startup Valuation.

Now if someone could come on down and explain why a 500-liter fridge costs more than an average standard air conditioner, that would be great.