How to Valuate Innovative Products

This post by West Garrett was originally published on the Louisiana Technology Park blog.

If you’re a financial analyst or anyone involved in valuing early-stage startup businesses, you’ve probably come across a few innovative companies for which there is little historical data to reference.

Indie video games are prime example of innovative products that are difficult to accumulate operational data on. This makes valuation extremely difficult.

Recently, the Louisiana Technology Park has charged me with the formidable task of developing a methodology of valuating the indie games made here. After numerous hours of research and trial-and-error, I was able to create a valuation strategy. Here are my four big takeways from the project:

TIp #1: Understand That Valuation is More Art Than Science

Valuating innovative companies is certainly subjective. In fact, venture valuation is often considered one of the most ambiguous and misunderstood concepts in finance.

This unpredictable nature is amplified in tech and digital media startups, which evolve around innovation, differentiation and products or services that are often unique to others in the market. So if you’re uncomfortable with uncertainty, valuating innovative companies may feel difficult to you.

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