valuation
val-yoo-AY-shun
/ˌvæljuˈeɪʃən/
An estimation of the worth of something, especially a company or asset.
Valuation is often subjective in the startup world because it is based on future potential rather than current profits.
The story behind the word. From the Latin 'valere,' meaning to be strong or to be worth. It is the same root that gives us 'valiant' and 'value.' It suggests that the 'strength' of a company is measured by its worth.
Word relationships
- appraisal: Appraisal is often used for physical items like jewelry or houses; valuation is more common for businesses and stocks.
- estimation: Estimation is a general guess; valuation implies a more formal, often mathematical, process.
Commonly confused with
- price: Price is what you pay; valuation is what the asset is actually worth (or thought to be worth).
Word family
- value (noun/verb): The importance, worth, or usefulness of something.
- evaluate (verb): To form an idea of the amount, number, or value of.
Collocations
- market valuation
- high valuation
- valuation model
- asset valuation
Example sentences
- "After the latest round of funding, the startup's valuation soared to $500 million." Discussing a company's worth.
- "The investors and the founders disagreed on the pre-money valuation of the company." Explaining the investment process.
Memory hook
Valuation is the 'Value' of the 'Nation' (or in this case, the company). Valuation = Calculating the Value.
When not to use
Don't use 'valuation' for the price of a simple item like a loaf of bread; use it for complex assets like businesses, real estate, or rare art.
Fun facts
- A 'down round' occurs when a company's valuation in a new funding round is lower than its valuation in the previous round.
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