- Description
- Specifications
The valuation of equity in start-up entities requires consideration of a number of factors that may influence the market price. Many of these factors are highly influenced by "intangibles", in particular, the perceptions of both the vendor (the start-up founders/management) and the purchaser (the equity investor).
There are over a dozen different methods for determining the value of a company. Different investors will have their own preferred method. However, "value" is very much in the eye of the beholder and a company is worth what a given buyer is prepared to pay. In this sense, valuation is more art than science.
Because of the various types of valuation techniques and the nature of assumptions that must be made, formal valuations rarely (if ever) provide a single valuation figure or even a narrow range of figures.
This paper reviews some of those techniques and other issues that need consideration when valuing an emerging company:
- Factors Influence Valuation
- Prerequisites For Valuation
- Issues To Be Considered In A Valuation
- Valuations Of Start Ups Is Imprecise
- Key Valuation Inputs
- Illiquidity
- Exit Event
- Terminal Value
- Price/Earnings Ratio
- Liquidity Risk For An Initial Public Offering (IPO)
- Liquidity Risk For A Private Company Or Unlisted Public Company
- ASX P/E Ratio
- Estimate Of Future Earnings Valuation Method
- Interest Rates
- Risk Multiplier
- Calculation Of Discount Rate