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Valuation of Start-Up Companies: Balancing Art and Science

Understand the essence of valuing start-ups. Learn about valuation techniques, including market, income, and asset approaches. Delve into the complexities of determining the worth of early-stage ventures. Gain insights from industry experts on private equity valuations. Explore the nuances of valuing companies at different stages of growth. Discover the art and science behind the valuation process. Enhance your knowledge of investment transactions and investor-entrepreneur dynamics.

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Valuation of Start-Up Companies: Balancing Art and Science

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  1. Valuing Start-Up & Early Stage Companies…Art or Science IACT Presentation February 23, 2010 Frank Morse Managing Director Carter Morse & Mathias

  2. Presentation Outline

  3. CMM Profile

  4. Valuation: A Working Definition: • At the core of every investment transaction is a mutually accepted valuation of the company by the investor and entrepreneur. • A valuation reflects both the entrepreneur’s determination of the acceptable amount of ownership that may be given in return for the investor’s capital and expertise, and the venture investor’s determination of the risks and rewards of the investment. • Value equals the present value of future benefits of ownership Adapted from Understanding Valuation: A Venture Investor’s Perspective, Callow and Larsen

  5. Carter Morse & Company Valuation Premises • Value equals the present value of future benefits of ownership • Value is not always a single number • Value is based on a single point in time • What is valued • minority interests vs controlling interests • equity value vs. entity value

  6. Traditional Valuation Approaches

  7. Carter Morse & Company Valuation MethodologiesMarket Approach • Comparative Public Companies • Price / Earnings • Price / Cash Flow • Price / Book Value • Price / Revenues • Price / Asset Value • Comparative Acquisitions

  8. Carter Morse & Company Valuation MethodologiesIncome Approach • Income Methodology • Capitalized Returns Approach • Capitalization of Earnings • Capitalization of Cash Flow • Discounted Future Returns Approach • Discounted Net Cash Flow • Discounted Earnings

  9. Carter Morse & Company Valuation MethodologiesAsset Approach • Net Asset Value • Adjusted Book Value • Liquidation Value

  10. Private Equity Valuations Transactions under $250 million Source: GF Data Resources

  11. Valley of Death

  12. Valuation stages-Art or Science

  13. Valuation stages-Art or Science

  14. Valuation By Stage

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