Why startups cannot use DCF model?

Question

Accepted Answer

Startups cannot use DCF model due to lack of historical financial data and uncertainty of future cash flows.

DCF model requires historical financial data and reliable projections of future cash flows, which startups often lack.
Startups are often in the early stages of development and have high uncertainty around their future growth and profitability.
Alternative valuation methods such as comparables analysis or venture capital method may be more appropriate for startups.
DCF model assumes a stable and predictable business environment, which may not be the case for startups operating in rapidly changing markets.
Startups may also have limited access to capital markets, making it difficult to estimate the cost of capital required for DCF analysis.

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