Neil J. Beaton

Valuing Early Stage and Venture-Backed Companies (eBook, ePUB)

• Format: ePub

Produktbeschreibung

Valuing Early Stage and Venture-Backed Companies Unique in the overall sphere of business valuation, the valuing of early stage and venture-backed companies lacks the traditional metrics of cash flow, earnings, or even revenue at times. But without these metrics, traditional discounted cash flow models and comparison to public markets or private transactions take on less relevance, calling for a more "experiential" valuation approach. In a straightforward, no-nonsense manner, the mystique surrounding the valuation of early stage and venture-backed companies is now unveiled. With an emphasis on applications and models, Valuing Early Stage and Venture-Backed Companies shows the most effective way for your company to prepare and present its valuations. Featuring contributed chapters by a panel of top valuation experts, this book dispels improper valuation techniques promulgated by unknowing business appraisers and answers your key questions about valuation theory and which tools you need to successfully apply in your specific situation. Here, you'll find out more about various valuation techniques, including: * "Back solving" valuation * Modified cost approach * Option pricing model * Probability-weighted expected returns model * Asian puts * New data on discounts for lack of marketability Detailed and hands-on, Valuing Early Stage and Venture-Backed Companies equips you with broad foundational data on the venture capital industry, as well as in-depth analyses of distinct early stage company valuation approaches. Performing valuations for your early stage company requires an understanding of the special circumstances faced by your organization. With ample examples of generally accepted allocation models with complex capital structures common to early stage companies, Valuing Early Stage and Venture-Backed Companies mixes real-life experience with deep technical expertise to equip you with the complete, user-friendly resource you'll turn to often in valuing your early stage or venture-backed company.

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Produktdetails

• Verlag: John Wiley & Sons
• Seitenzahl: 224
• Erscheinungstermin: 4. März 2010
• Englisch
• ISBN-13: 9780470602768
• Artikelnr.: 37297561

Autorenporträt

NEIL J. BEATON, CPA/ABV, CFA, ASA, is a nationally known business valuation expert and speaker on the valuation of early stage companies. He is the National Partner in Charge of Valuation Services for Grant Thornton, LLP, an international audit, tax, and financial advisory services firm. He has more than twenty-seven years of professional experience and is a recognized expert witness in state and federal courts as well as international tribunals. He has authored an AICPA publication on valuing stock options and intangible assets for financial reporting purposes.

Inhaltsangabe

Preface ix
Acknowledgments xi
About the Author xiii
CHAPTER 1 Laying the Foundation 1
A Unique Landscape 1
An Overview of the Venture Capital Industry 8
Conclusion 14
CHAPTER 2 Understanding Early Stage Preferred Stock Rights 17
Stock Rights 19
Contractual Rights 28
Conclusion 32
CHAPTER 3 Enterprise Valuation Approaches 35
Relevancy of Traditional Valuation Approaches 35
Cost Approach 40
Market Approach 43
Income Approach 45
"Vectoring" Valuation Approach 46
The Income Approach as an Oxymoron 53
Conclusion 58
CHAPTER 4 Application of the Option-Pricing Method in Allocating Enterprise
Value 59
Important Assumptions Underlying the Option-Pricing Model 61
Option-Pricing Method Steps in Application 66
Other Considerations in the Option-Pricing Method 86
Pros and Cons of the Option-Pricing Model 87
Conclusion 88
CHAPTER 5 Application of the Probability-Weighted Expected Returns Method
in Allocating Enterprise Value 89
Illustration of the PWERM 90
PWERM Critical Assumptions 94
Overview of Stock Rights 96
Identification of Outcomes 98
Updating PWERM Analyses 104
Conclusion 105
CHAPTER 6 Applicable Discounts for Early Stage Companies 107
Basis of Discounts 108
Suggested "Corrections" to the Current Use of Put Models for Quantifying
DLOMs 114
Dilution Discount 119
The Likelihood of Liquidity 120
Conclusion 123
CHAPTER 7 Advanced Valuation Topics for Early Stage Companies 125
Utilizing the OPM as a "Valuation" Methodology 127
Sequential and Compound Options 127
Allocating the Residual Value 131
Further Extensions for Compound Options 137
Venture Capital Rates of Return 139
Executive Stock Compensation 143
Conclusion 143
APPENDIX A Allocation of Enterprise Value Using the Option-Pricing Method:
Treatment of Derivatives on Common Stock 145
APPENDIX B Volatility in the Option-Pricing Model 155
Notes 175
Index 179