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The guys talk about the different methods to value a startup, particularly when the business is pre-revenue. Full Podcast Transcript NASIR: All right. Welcome to our podcast where we cover business in the news and add our little legal twist to it like a little lemon at the end of a… what do you add lemons to? Fish and…? MATT: Uh… NASIR: Anyway, my name’s Nasir Pasha. MATT: And I’m Matt Staub. NASIR: I think most of the time you add lemons to a podcast. That’s the only thing I can think of. MATT: Oh, you’re talking about the end, after something’s already made. So, that would be very common in a fish and chips setting. NASIR: Oh, yeah, fish and chips. MATT: I thought you were talking about something like a lemon peel garnish type situation. NASIR: No, that’s way too fancy for us. We’re a fish and chips kind of podcast. So, welcome to our cooking show and food culinary arts. MATT: I’ve actually ranked my top ten things to have a twist of lemon with, food-wise. NASIR: Is one of them a podcast? MATT: Podcast is number one. NASIR: Okay. Great. MATT: But, if I did have a business, let’s say I did start a business and it was solely based on what to put a twist of lemon on at the end, but the problem was I wasn’t really making any money but I’m presenting in front of some investors and I need to value how much this business is worth, how would I go about doing that? That’s our topic for today. NASIR: Yeah, just sitting here, watching you find a way to transition it to our topic of the day is just entertainment in itself. There’s no lemon needed, in other words. Yeah. So, we’re talking about valuation today. MATT: I’m sure a lot of people have seen Shark Tank or have at least heard about Shark Tank. But, if you’ve seen an episode, you know that, at least once an episode – actually, not even once an episode – in every single one, you see they come out and the first thing they say is, “I’m offering this percent of my company for this amount of money.” So, you know, you multiply that out and that’s how you get what the entrepreneurs value their company at and there’s usually a dispute between what someone values it at and what the sharks value it at. And so, I think that’s, I would say, for those people that are on that show, that’s probably the toughest thing for them to do because, a lot of times, sometimes, the businesses have some track record or some sales or specific industry things like that, but I think, a lot of times, they’re just kind of throwing numbers out there. They’ve looked at prior episodes and prior things and just tried to take a stab at, you know, what they think the value of their company is, and sometimes they get called out, especially Mark Cuban will do that pretty frequently. NASIR: Yeah. MATT: And the one guy in the middle, was that Kevin O’Leary? I think it’s his name. He’ll always because all he cares about is the bottom-line. NASIR: Yeah, I like his approach. Well, I mean, he’s pretty harsh when it comes to valuation. He’s pretty aggressive in that respect. But you know what’s interesting about this topic – I think we should give a disclaimer because we’re not necessarily experts in business valuation. Obviously, we can give our legal perspective on this but it seems like everybody and their mother are experts on valuation. If you were reading online, it would seem that way, right? MATT: Only mothers, no fathers. NASIR: Is that the term? I don’t know. Everybody and their parents and their cousins and their brothers and sisters and sons and daughters seem to be experts in this field, and they come up with these rules like, “Oh, well, look, if you’re in your first year and you don’t have any assets, you’re a startup, automatic million-dollar valuation and then it starts from there. It goes up if you’re pre-revenue,” all this stuff. But, at the end of the day, we can talk about the different ways that people approach it but, to kind of cut to the chase, I think, at the end,