Technology companies for sale and startups raising

The value sits in things that are not on the balance sheet

In a technology company the fixed assets are almost irrelevant. What you buy is the code and its documentation, the client base and its behaviour, the recurring contracts, the team that knows how the product works and the intellectual property. An excellent product with poorly documented IP is worth considerably less than it looks.

That is why the review focuses on ownership of the software, on the contracts with developers — including freelancers and outside agencies — on third-party and open-source licences used, and on whether there is critical dependence on a single person.

The metrics that support a valuation

In subscription and recurring-service businesses, the quality of revenue counts for much more than its volume.

• Recurring revenue versus one-off projects, and average contract length
• Client and revenue churn, which is what reveals whether the product is genuinely used
• Concentration: how much the largest clients weigh on the total
• Acquisition cost against customer lifetime value
• Technical debt and the real cost of keeping the platform running
• Ownership of the intellectual property and data protection compliance