WSJ Asks: Startup Valuations Art or Science?

Here’s a great article from today’s WSJ on valuating start-ups- “Is it more art or science?“.  We get asked this question all the time- and from time to time actually perform formal valuations for start-ups.

One quote I liked:

“It’s rule-of-thumb stuff,” she says. “VCs are sophisticated and they are doing it full time, but they make mistakes.” But sometimes, the results are life-altering — possibly like Heitzmann’s investment in Pinterest, if everything goes right.

So- “rule of thumb” stuff.  I can’t tell you how many times a potential client says “well, I don’t really want a valuation, can you just tell me a rule of thumb.”  VC’s are super experienced at what they do and often have a gut feel for valuation.  But as the author notes, still get burned.

What do you think?  Art or science?  Feel free to weigh in.