If your tech startup is being considered for acquisition, you’ll need to accurately determine the value of your technology portfolio—both now and in the future. This establishes a solid foundation for negotiations and strategic decision-making, increasing the likelihood of a successful deal.
Below, 18 members of Forbes Technology Council share their best advice for startup leaders seeking to calculate the current and potential worth of their company’s technology. From assessing scalability to discovering how much your customers value your solution, here’s how you can conduct a thorough evaluation that highlights your company’s true worth.
1. Conduct A Comprehensive Technology Audit
One key piece of advice for leaders to ensure they accurately value their tech portfolio during acquisition is to conduct a comprehensive technology audit. This should include assessing the current state, scalability and potential for future innovation of the tech assets. Engage external experts for an unbiased valuation, and consider both market trends and proprietary technology advantages. – Savitri Sagar, Kenzo Infotech
2. Start With The Total Addressable Market
Assess the total addressable market to gauge your company’s market potential. Then, utilize data from analysis and bottom-up market research to evaluate the market and revenue potential against the development and operational costs of your tech. Consider the size of your investment, your development roadmap and any existing technology debt to accurately identify your return on investment. – Pankaj Chawla, 3Pillar Global
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3. Look Beyond Your IP
Value is determined by the buyer and market demand. Many times, besides a company’s technology and intellectual property, its people and their willingness to continue the journey for some time after an acquisition are critical. Further, the data created by the technology can be the most valuable asset. The icing on the cake is an anchor customer and partner with recurring revenue and a robust backlog. All together, these things create value. – John Walsh, III, Red Summit
4. Keep Your Company Data Current
Ensure your company data—for example, financials, commercials and employees—is accurate and up to date. It should be readily available through the latest business intelligence tools and analytics software. – Didem Un Ates, Goldman Sachs
5. Assess Scalability And Future Value
Whether and how the current technology portfolio can be scaled is an important consideration before a tech startup is acquired. The existing data in the tech portfolio should also be valued accurately. – Nihinlola Adeyemi, ErrandPay Limited
6. Review Legal Rights And Liabilities
Rights to intellectual property and data, as well as future regulatory risks, are significant considerations if a company is already under acquisition consideration. It is crucial to ensure that the underlying technology supporting the vision being presented can be integrated, scaled and monetized without becoming a future liability. Fundamentals in this area are essential. – Alonso Vargas, Flybuy
7. Highlight The Innovative Aspects Of Your Portfolio
Emphasize the unique intellectual property, scalability and adaptability of your technology stack. But, in doing so, it’s important to clearly explain—simply and without buzzwords and jargon—what sets you apart from competitors. Highlighting the innovative aspects of your tech portfolio and the competitive advantages it provides helps justify a higher valuation during acquisition negotiations. – Jay Samuels, insytz
8. Emphasize Integrations
For tech startups aiming for acquisition, emphasizing the importance of integrations is crucial. Integrations can be a key differentiator in acquisition deals, showcasing product-market fit and strengthening the company’s defensive moat strategy. – Joshua Lamerton, PropTexx
9. Consider Several Components When Assigning The FMV
The fair market value needs to be mapped to product maturity and the investment thesis that brought you here. Then, it should be weighted against several major components: the business model and market fit as indicators of growth potential, the impact on value from the management team’s track record and expertise, and the value of the intellectual property (are additional investments needed?). Be prepared to roll up your sleeves and get into the weeds. – John Cho, Tria Federal
10. Share Your Strategic Vision
When evaluating your tech portfolio, emphasize the strategic vision behind your technology. Specifically, highlight how it meets current needs and addresses future trends. Articulate how your technology aligns with industry dynamics and consumer demands, showcasing its long-term value and growth potential and positioning your company as a forward-thinking investment. – Raj Indupuri, eClinical Solutions
11. Highlight Your Tech’s Role In The Buyer’s Long-Term Vision
While many valuation strategies are obvious, two critical aspects are often overlooked. First, highlight how your technology aligns with the acquiring company’s strategic goals and supports its long-term vision. Second, anticipate future needs, showing how the technology can drive customer success over the next three to five years. This future-oriented approach can significantly enhance perceived value. – Mike Capone, Qlik
12. Be Ready To Back Up Your Credibility
In deep tech, value is based on the credibility of the technological claims, which are backed by patents, published research and staff expertise. Everything else is snake oil. Many acquirers have been burned because they are somehow convinced they are the “smartest people in the room,” even when they can’t understand the technology. Their only metric is an arbitrary sales or subscribers threshold. – Denis Mandich, Qrypt
13. Identify The Value Of The Challenge Your Tech Solves
Technology has no value unless you can understand the value of the challenge it solves. Understanding the potential market value of the problem, opportunity or challenge the technology addresses is fundamental to valuing the technology solution itself. – Richard Ricks, Silver Tree Consulting and Services
14. Get Insight From Customers
Company leaders should engage in detailed conversations with their customers. They need to understand the value that their technology brings to their customer by asking what the world would look like if their technology didn’t exist. Deep, honest conversations about what customers would have to do if they could not use a company’s product will provide all the information needed to value the portfolio. – Russ Kennedy, Nasuni
15. Showcase Customer Case Studies
To ensure an accurate valuation of your tech portfolio, emphasize the synergy between technology and customer success. Showcase case studies where your technology has driven significant ROI for clients. This approach quantifies the technology’s value and illustrates its real-world impact, providing a compelling narrative that resonates with potential acquirers and justifies a higher valuation. – Hadi Ganjineh, Super Energy Corp.
16. Define Your IP Strategy
You should value the company’s technology during an acquisition by having a well-defined intellectual property strategy. IP assets are often a company’s most valuable assets and a central factor in making the company attractive to buyers. Such knowledge allows one to negotiate and ensure that the actual value of the technology is represented. – Will Conaway, NTT Data
17. Assemble A Circle Of Experts
Consider both the fundamentals of the business and alternative valuation methodologies. Assemble a circle of experts to help value the business and determine the optimal purchase solution. Regularly review the valuation with an independent stakeholder group, and ensure you maintain an effective advisory board or board of directors. – Dax Grant, Global Transform
18. Avoid Assumptions
Any business or asset is worth what someone else is willing to pay for it. It’s critical to not assume anything. Make sure you go to market in a robust way, leaving no stone unturned. While metrics such as growth, profitability and market comps will dictate your asking price, you might be surprised how often a buyer is willing to pay more. – Savneet Singh, PAR
