VALUATION OF STARTUP COMPANIES ON CROWDFUNDING PLATFORMS

Crowdfunding has experienced significant growth in recent years, both globally and in Türkiye, as an alternative capital market instrument that enables startup companies and innovative projects to access the financing they require through contributions from a large number of investors. Particularly given the difficulties that early-stage ventures encounter in accessing traditional sources of finance, crowdfunding has evolved into one of the complementary financing mechanisms within the entrepreneurial ecosystem. Through digital platforms, this model enables investors to participate in innovative ventures with relatively modest investment amounts while allowing startup companies to raise capital from a broad investor base.

The legal framework governing crowdfunding in Türkiye was first established through the Communiqué on Equity-Based Crowdfunding, published in 2019. Subsequently, with the Crowdfunding Communiqué (III-35/A.2), which entered into force in 2021, the regulatory framework was expanded to include debt-based crowdfunding, thereby creating a more comprehensive structure supporting the development of the sector. During this period, the number of crowdfunding platforms authorized by the Capital Markets Board of Türkiye (CMB) increased from two to nineteen. Numerous startups successfully raised funds through these platforms, while the total amount of funding secured through the ecosystem reached approximately TRY 1.45 billion by the end of 2025. Over the same period, 165 startup companies obtained investment financing, and more than 46,000 investors participated in the crowdfunding ecosystem.

This rapid expansion has also increased the importance of institutional mechanisms designed to protect investors and strengthen the governance structures of crowdfunding platforms. As the number of funded ventures, participating investors, and campaign sizes continues to grow, the evaluation of startup companies must be conducted through more systematic, transparent, and comparable processes. Within this context, one of the most critical factors directly influencing investors’ investment decisions is the valuation process of startup companies.

1. Current Valuation Practices

The valuation of startup companies on crowdfunding platforms differs significantly from the valuation of conventional businesses. The primary reason is that a substantial proportion of ventures seeking funding are early-stage enterprises with limited financial histories, while expectations regarding future growth play a decisive role in determining their enterprise value. Consequently, the valuation of startup companies is not based solely on historical financial performance. Instead, numerous qualitative factors—including the business model, the experience of the management team, technological capabilities, market size, scalability potential, and competitive advantages—are incorporated into the valuation process.

International practice demonstrates that no single valuation methodology is universally applied to startup companies. Depending on factors such as the industry in which the startup operates, its stage of development, financial structure, and investment objectives, different valuation approaches may be preferred. In many cases, hybrid valuation models combining multiple methodologies are adopted. Particularly in investments undertaken by venture capital funds, angel investor networks, and crowdfunding platforms, it has become common practice to validate enterprise value using multiple valuation techniques and assess the results collectively.

The principal valuation methods commonly applied to startup companies are outlined below.

1.1. Discounted Cash Flow (DCF) Method

The Discounted Cash Flow (DCF) method is based on estimating the present value of the future cash flows expected to be generated by a business through the application of an appropriate discount rate. As one of the most widely used valuation methodologies in conventional corporate finance, the DCF approach generally provides reliable results for businesses that generate stable revenues and whose financial performance can be forecast with a reasonable degree of certainty.

However, for early-stage startups, the DCF method is often considered insufficient when applied as a standalone valuation approach due to the high degree of uncertainty associated with long-term financial projections. In many cases, revenue generation has not yet commenced, future growth rates remain difficult to predict, and operational risks are relatively high. Consequently, the estimated enterprise value becomes highly sensitive to the assumptions underlying the valuation model. For this reason, on crowdfunding platforms, the DCF method is generally applied in conjunction with other valuation approaches rather than being used independently.

1.2. Market Multiples Approach

The Market Multiples Approach determines enterprise value by analyzing the relationship between the market valuations and financial indicators of comparable companies operating within the same industry. Under this approach, valuation multiples derived from comparable publicly traded or recently transacted companies are applied to financial metrics such as revenue, EBITDA, operating profit, or other relevant performance indicators of the subject company.

Particularly within the software, technology, and high-growth sectors, revenue multiples are widely utilized in international investment practice. Comparable companies are selected by considering factors such as industry, growth profile, and business model, after which their valuation multiples are analyzed to determine a reasonable enterprise value for the startup.

Although the Market Multiples Approach offers significant advantages by reflecting prevailing market conditions and providing a relatively straightforward valuation framework, the reliability of the valuation outcome depends heavily on the appropriate selection of comparable companies and the accurate assessment of market conditions.

1.3. Venture Capital Method

The Venture Capital Method is one of the most widely adopted valuation approaches for early-stage technology startups. Unlike conventional valuation methodologies that primarily focus on current financial performance, this approach is based on the enterprise value that the company is expected to achieve in the future.

Under this methodology, the startup’s anticipated exit value at a specified future date is first estimated. The present value of the company is then derived by discounting this expected exit value using the target rate of return required by investors. Accordingly, both the startup’s growth potential and the expected risk-return profile from the investor’s perspective are assessed simultaneously.

Widely adopted by international venture capital funds, this methodology serves as a key valuation reference, particularly for pre-Series A financing rounds and other early-stage venture investments.

1.4. Berkus Method

The Berkus Method was specifically developed for valuing startup companies that have little or no operating history and have not yet generated revenue. Rather than relying on historical financial performance, this methodology evaluates the key factors that are expected to create value in the future.

Factors such as the capability of the management team, the innovativeness of the business concept, the development status of the product or prototype, strategic partnerships, and market readiness are assessed individually to determine the enterprise value. Accordingly, the Berkus Method enables qualitative factors to be incorporated systematically into the valuation process, particularly for early-stage ventures where financial information remains limited.

1.5. Scorecard (Comparative Scoring) Method

The Scorecard Method is a comparative valuation approach based on the average valuations of comparable early-stage startups. Under this methodology, the average enterprise value of similar startups operating within the relevant industry is first established. The valuation is then adjusted through a weighted scoring system that evaluates factors such as the quality of the management team, target market, competitive advantage, technological capability, marketing strategy, and capital requirements.

Based on the resulting score, the average enterprise value is adjusted upward or downward by considering the startup’s strengths as well as areas requiring further development. Widely adopted by angel investor networks and early-stage investment platforms, this methodology occupies a significant place in practice because it incorporates both qualitative and quantitative evaluation criteria into a single valuation framework.

1.6. Hybrid Valuation Approaches

Rather than relying exclusively on a single valuation methodology, contemporary startup valuation practices increasingly favor hybrid models that combine multiple valuation approaches. In valuation exercises conducted by crowdfunding platforms, venture capital funds, and professional investors, the results derived from Discounted Cash Flow (DCF), Market Multiples, the Venture Capital Method, and qualitative assessment models are analyzed collectively.

This integrated approach enables valuers to capitalize on the strengths of different methodologies while evaluating the valuation outcome from a more comprehensive perspective. Furthermore, selecting and combining valuation methods according to the startup’s industry, stage of development, and investment objectives contributes to determining enterprise value in a more balanced and reliable manner.

2. Organization of the Valuation Process in International Practice

In countries where the crowdfunding ecosystem has reached a relatively advanced stage of development, the valuation of startup companies is not regarded merely as the application of specific financial methodologies. Instead, valuation is treated as a comprehensive assessment process encompassing the startup’s financial structure, business model, growth potential, technological capabilities, and the characteristics of the market in which it operates. Consequently, in international practice, the organization of the valuation process is considered just as important as the valuation methodologies themselves, particularly with respect to the institutions responsible for conducting valuations and the expertise involved.

An examination of crowdfunding platforms operating in the United States, the United Kingdom, and European Union member states indicates that enterprise value is generally not determined directly by the platforms themselves. Instead, valuation analyses prepared by entrepreneurs are reviewed by professional investors, venture capital funds, investment advisors, or corporate finance advisory firms before being presented to prospective investors. In this framework, crowdfunding platforms primarily perform an intermediary function by ensuring that information forming the basis of investment decisions is disclosed to investors in a transparent manner, whereas the valuation process itself is treated as a specialized professional discipline requiring dedicated expertise.

In particular, venture capital funds and angel investor networks operating in the United States conduct comprehensive financial and operational due diligence prior to making investment decisions. During this process, the startup’s financial condition, legal status, intellectual property rights, market potential, competitive environment, and the capabilities of its management team are evaluated collectively. Enterprise value is typically determined through the application of multiple valuation methodologies rather than relying on a single approach. A similar practice has been adopted by crowdfunding platforms, where the principal assumptions underlying enterprise valuation are disclosed within the campaign information provided to investors.

Crowdfunding platforms operating in the United Kingdom place particular emphasis on standardizing pre-investment review procedures. These platforms conduct legal and financial due diligence in accordance with established procedures while developing practices designed to ensure that investors can clearly understand the key assumptions underlying enterprise valuation. Accordingly, investors are expected not only to assess the stated enterprise value but also to evaluate the assumptions upon which that valuation has been established.

Across the European Union, particularly in larger-scale startup investments, specialized organizations engaged in corporate finance advisory, independent financial advisory, and mergers and acquisitions (M&A) advisory services play an active role in valuation processes. Financial analyses and valuation reports prepared by these organizations constitute one of the principal sources of information supporting investment decisions.

When international practices are evaluated collectively, it becomes evident that there is no single organizational model governing the valuation of startup companies. Nevertheless, several common characteristics can be identified across jurisdictions. These include the application of established valuation methodologies, the involvement of experts from multiple disciplines, transparent disclosure of key valuation assumptions to investors, and the support of valuation conclusions through professional review processes. This approach reinforces the understanding that enterprise value should not be regarded as a definitive or absolute figure, but rather as a professional assessment developed under a defined set of assumptions.

Given the scale that the crowdfunding ecosystem has now achieved, strengthening the institutional capacity for startup valuation is important not only for supporting sound investment decisions but also for ensuring the sustainable growth of the entrepreneurial ecosystem. In this context, establishing institutional structures capable of conducting valuation activities in accordance with recognized professional standards has emerged as one of the key areas of development receiving increasing attention in international practice.

3. A Proposed Institutional Model for the Valuation of Startup Companies

Considering the current scale of the crowdfunding ecosystem, the increasing volume of startup investments, and the continued expansion of the investor base, strengthening the institutional capacity for startup valuation has emerged as one of the natural areas for the ecosystem’s future development. While various valuation methodologies are currently employed in startup valuation, international practice demonstrates that financial advisors, venture capital funds, investment banks, and corporate finance professionals all make active contributions to the valuation process. Nevertheless, the development of common valuation methodologies, standardized reporting practices, and the wider availability of specialized professional valuation services would contribute significantly to making valuation processes more systematic, transparent, and comparable.

An examination of the financial system reveals that many specialized professional activities are carried out within established professional standards. Independent audit firms provide assurance regarding the reliability of financial statements; credit rating agencies assess the creditworthiness of issuers and capital market instruments; real estate appraisal firms determine the market value of real property; and insurance loss adjusters evaluate claims arising from insured events. The common characteristic shared by these professions is that assessments influencing investment decisions are conducted on the basis of professional expertise, recognized qualifications, and established standards.

Similarly, the valuation of startup companies extends well beyond the preparation of financial analyses alone. In valuing early-stage ventures, financial indicators must be evaluated alongside numerous additional factors, including technological capability, intellectual property rights, the competence of the management team, the sustainability of the business model, market size, competitive advantage, and growth potential. Accordingly, startup valuation represents a multidisciplinary field of expertise that integrates finance, entrepreneurship, technology, strategic management, and industry analysis.

For this reason, professionals engaged in startup valuation should not be expected to rely solely on their knowledge and experience in finance. They should also possess expertise in venture capital investments, the entrepreneurial ecosystem, technology-driven business models, intellectual property rights, and valuation methodologies specifically designed for early-stage companies. Within this framework, expanding professional education programs, certification mechanisms, and continuing professional development initiatives dedicated to startup valuation would make a significant contribution to the development of common methodologies, the enhancement of valuation report quality, and the cultivation of a specialized talent pool in this field.

Within this context, establishing an independent and institutionalized valuation mechanism for startup companies operating within the crowdfunding ecosystem has emerged as an important requirement for enhancing investor protection, promoting consistency across crowdfunding platforms, and ensuring that valuation processes are conducted in accordance with common professional standards. Accordingly, valuation engagements relating to startup companies should be performed by independent advisory firms specialized in corporate finance and startup valuation. Such a framework would encourage professional specialization in valuation activities, support the development of common methodologies, and contribute to achieving methodological consistency across market practices.

Valuation reports prepared by these specialized advisory firms should follow a standardized reporting framework encompassing the valuation methodologies applied, key assumptions, financial projections, sensitivity analyses, principal risk factors affecting the valuation, and the rationale supporting the concluded enterprise value. Adopting such a reporting standard would significantly enhance the transparency and comparability of valuation processes. Consequently, investment committees would be able to evaluate not only the resulting enterprise value itself but also the analyses, assumptions, and methodologies upon which that valuation has been established.

Furthermore, standardized valuation reports disclosed to investors as part of the campaign information documentation would enable investment-related information to be presented in a more transparent, understandable, and comparable manner, thereby supporting more informed investment decisions.

Under the proposed institutional model, valuation reports would not serve as a substitute for the investment committees established by crowdfunding platforms. Rather, they would function as a complementary analytical instrument supporting the investment decision-making process. While investment committees would continue to evaluate the overall investability of startup companies, independent valuation reports prepared by specialized advisory firms would provide the analytical and methodological foundation for determining enterprise value. This would establish a multi-layered evaluation framework in which the assessments of investment committees and independent valuation analyses complement one another.

The adoption of common reporting standards, the application of valuation methodologies in accordance with established professional principles, and the development of specialized institutional capacity in this field would strengthen investors’ decision-making processes, enhance consistency among crowdfunding platforms, and enable startup companies to undergo more transparent and comparable valuation processes. From this perspective, startup valuation should be regarded not merely as a technical exercise aimed at determining enterprise value, but rather as a specialized corporate finance service that strengthens investor confidence, supports sound corporate governance, promotes methodological consistency across crowdfunding platforms, and contributes to the sustainable development of the crowdfunding ecosystem.

4. Conclusion

As the crowdfunding ecosystem continues to expand, the valuation of startup companies has become one of the most critical components of the investment process. Owing to the distinctive characteristics of early-stage ventures, it is essential that traditional business valuation methodologies be complemented by venture capital-oriented approaches and qualitative assessment criteria. International practice demonstrates that conducting valuation activities in accordance with common methodologies, specialized expertise, and transparent reporting principles strengthens investor confidence while enhancing overall market efficiency.

Within this context, fostering the development of advisory firms specializing in startup valuation, establishing standardized reporting frameworks, and expanding education and certification mechanisms that support professional competence in this field will make a significant contribution to the institutional development of the crowdfunding ecosystem. Such an approach will not only improve the quality and consistency of valuation processes but will also enable investors to make more informed decisions, strengthen harmonization across crowdfunding platforms, and support the sustainable growth of the entrepreneurial ecosystem.