2025-08-23

The First Chicago Method in Startup Valuation

The First Chicago Method in Startup Valuation 

Valuing startups is challenging due to uncertain cash flows and high risks. The First Chicago Method helps tackle this uncertainty by incorporating multiple future scenarios. Let’s dive in! 

 

 What is the First Chicago Method?

 A hybrid valuation approach combining Discounted Cash Flow (DCF) and market multiples.

It considers three possible future scenarios:

 Best Case – The startup succeeds and grows exponentially. 

 Base Case – The startup achieves moderate success. 

 Worst Case – The startup struggles or fails. 

 

 Assigns probabilities to each scenario and calculates an expected valuation.

 Key Steps in the First Chicago Method

 Step 1: Build financial projections for best, base, and worst-case scenarios.

 Step 2: Apply Discounted Cash Flow (DCF) or revenue multiples to determine valuations under each case.

 Step 3: Assign probabilities to each scenario based on market conditions, competition, and risks.

 Step 4: Compute the weighted average valuation to derive the final estimate.

 

 Why Use the First Chicago Method?

 More realistic than single-scenario DCF or market multiple approaches.

 Suitable for startups and high-growth companies with uncertain outcomes.

 Helps investors and entrepreneurs manage risk and set expectations.

 

 Way Forward:

 The First Chicago Method provides a balanced view of potential outcomes.

 Particularly useful for VCs, angel investors, and startup founders.

 Requires strong market research and financial modeling expertise.

 

 What’s your take on the First Chicago Method? Have you used it before? Let’s discuss! ?

 

#FirstChicagoMethod #StartupValuation #BusinessValuation #VCFunding #DCF #Investment #Entrepreneurship #Finance

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Frequently Asked Questions

We provide professional valuation services across the following asset classes:
  • Land & Building (Residential, Commercial, Industrial, Agricultural)
  • Plant & Machinery (Manufacturing units, industrial assets)
  • Securities or Financial Assets (Equity shares, debentures, startups, AIFs)
  • Specialized Valuations for M&A, financial reporting, IBC, income tax, and more

Yes, our reports are fully compliant with applicable laws including:
  • Companies Act, 2013
  • SEBI Regulations (SAST, ICDR, AIF)
  • IBC, 2016
  • Income Tax Act, 1961
  • Valuation Standards by ICAI, IBBI, and IVSC

Absolutely. We have IBBI-Registered Valuers under all three categories—Land & Building, Plant & Machinery, and Securities/Financial Assets. Our team also includes experienced chartered accountants and engineers.

We serve a wide range of clients including:
  • Companies & Startups
  • CA & Law Firms
  • Banks & NBFCs
  • Government Departments
  • Individuals & HUFs

Our process is simple and efficient:
  1. Initial consultation to understand the requirement
  2. Document collection and site visit (if needed)
  3. Data analysis and valuation calculation
  4. Final report delivery, certified by a Registered Valuer

Key documents generally include:
  • Ownership/title documents
  • Asset photos or plant list
  • Latest financials
  • Company PAN, GST, or registration
  • Cap tables or investment details (for startups)

Turnaround time:
  • Land/Building or Plant & Machinery: 3–7 working days
  • Financial Assets / Startups: 1–7 working days
  • Fast-track services available on request.

Valuation may be required for:
  • Startup fundraising & ESOPs
  • Business transfers or buyouts
  • Regulatory compliance (SEBI, IBC, Income Tax)
  • Bank loans or mortgages
  • Fair value financial reporting
  • Mergers & Acquisitions

Yes, we specialize in:
  • 409A compliant valuations
  • DCF, NAV, and Berkus method-based startup valuations
  • ESOP pricing & compliance support

Our fees are competitive and project-specific, based on:
  • Nature and size of asset
  • Complexity of engagement
  • Regulatory requirements
  • Contact us for a personalized quote.

Our detailed reports feature:
  • Valuation method and justification
  • Market research & data
  • Key assumptions and disclaimers
  • Final value conclusion
  • Certificate by the Registered Valuer

Yes. We offer remote/desk-based valuation for startups, financial assets, and select use-cases. For physical assets, we usually require on-site verification.

Yes. We offer:
  • Monthly/quarterly retainer packages
  • Bulk valuation pricing for CA firms, legal advisors, banks, and corporates

Yes. Client confidentiality is paramount. All data shared is stored securely and not disclosed to any third party without your consent.

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