Finance · business glossary
What is Valuation?
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
definition
An estimate of what a whole business is worth, used when raising investment, selling, or bringing in a partner.
Valuation explained
Valuation is an estimate of what a business is worth. Common methods use multiples of profit or revenue, discounted future cash flows, or comparable deals.
formula
Post-money valuation = Investment ÷ Equity % given (for funding rounds)
example
An investor paying ₹1 crore for 10% values the business at ₹10 crore after the investment.
why it matters
It decides how much ownership founders give up when raising money, and what a business sells for.
common mistake
Chasing the highest valuation at the cost of terms, investor fit or future fundraising.
Frequently asked questions
What is Valuation?
An estimate of what a whole business is worth, used when raising investment, selling, or bringing in a partner. Valuation is an estimate of what a business is worth. Common methods use multiples of profit or revenue, discounted future cash flows, or comparable deals.
How do you calculate Valuation?
Post-money valuation = Investment ÷ Equity % given (for funding rounds). An investor paying ₹1 crore for 10% values the business at ₹10 crore after the investment.
Why does Valuation matter?
It decides how much ownership founders give up when raising money, and what a business sells for.
What is a common mistake with Valuation?
Chasing the highest valuation at the cost of terms, investor fit or future fundraising.
Related terms
EBITDA
Earnings before interest, tax, depreciation, and amortisation — a measure of operating profitability that strips out financing and accounting decisions to make businesses easier to compare.
Debt-to-equity ratio
How much of a business is funded by borrowed money compared to the owner's own invested capital — a key measure of financial risk.
Unit economics
The revenue and cost of a business at the level of one single unit — one customer, one order, one product — used to judge if the model actually works before scaling it.