Posted on August 11, 2025 by MergerDomo
How to Value Startups in M&A Transactions
If you are seriously interested in funding a start-up and you need a proper understanding of the how's and the what's and the what-not to do, end your search here because this is the guide you will need before giving your ideas any profound thoughts. This isn't just about investing. It's about current-seeing the future. Valuing a startup in an M&A deal is as good as guessing the value of a racing horse before the gates even open. You're not only just paying for what’s visible now but also wagering on how fast it’ll run and where it might finish. In India’s vibrant yet volatile startup ecosystem, getting that valuation right is imperative. India led global tech startup funding in early 2025, ranking third even amid all the subsidiary dips. Gujarat alone raised ₹400 crores in venture and strategic capital between April and August 2025, demonstrating regional momentum, according to the Times of India. Traditional valuation methods like EBITDA multiples or discounted cash flows often flounder for nascent startups. These ventures may not yet be profitable or even revenue-yielding. So what should you look at as an acquirer? It is so much like judging a cricket team before a match; the current scoreboard matters less than the team’s potential to win.
Here’s what typically drives startup valuations:
1. Propulsion over profits: Active users, retention rates, or early revenues often outweigh traditional balance sheets. Investors want to know if the startup has product-market fit (PMF).
2. Founders and the associates: A seasoned founding team builds confidence, as it is like a strong batting lineup. It perfectly attracts acquirers through leadership capability and execution skills.
3. Market opportunity: Is the startup playing in a narrow street or an open field? A scalable business model in a growing market earns higher value.
4. IP and tech stack: Proprietary tech, patents, or exclusive partnerships are aces up the sleeve. They reduce risk and increase enduring payoff.
5. Comparable transactions: Acquirers often look at recent M&A deals in similar sectors for benchmarking, just like how we check prices before buying property
In 2025, deals are cautiously walking hand-in-hand with ambition. Startup valuations demand a blend of numbers, narrative, and nuance. As they say, ‘It’s not just what you’ve built; it’s what you’re building next that sets the price tag.’ Whether you're buying or selling, the one fair asset you should not be overlooking is a smart valuation. This can make a deal plummet to the ground or soar up high. It is the ultimate key to a precise and robust valuation. At MergerDomo, we offer elegant consulting solutions to all merger-related concerns. Contact us for more information on the website.
