How to measure the profitability of a startup? 3 simple methods.

[szczupak]

http://www.businesshackers.com/2007/06/01/what-do-you-absolutely-need-to-start-a-startup/

[danielha]

Those are just some generic and basic return ratios and much less relevant to the size of most of these web startups.

[yubrew → danielha]

^ Agreed. Most businesses determine their worth from net present value, comparable sales, or capitalization rate based on net operating income.

A problem with these web start ups is that they often don't have substantial income, and often do not have comparable sales. Two years ago, who honestly thought that $500mm for MySpace turned out to be a bargain?

[szczupak]

Danielha NPV, IRR are good measures too, but I think 90% of investors still use ROE, ROI, ROA etc.