Topic: General Posts

Subject: Valuation assistance
Eric Stevens
Member: 2011
Posts:10
Submitted on 07-12-17 11:24 am
Message:

Colleagues,  


My clients are interested in making an equity investment in a small pre-revenue company.  I am looking for some guidance on how to appraoch this valuation since it is pre-revenue.  If you have some thoughts I would appreciate hearing from you.


Warmest.



Eric Stevens


703-431-5000


EricJonStevens@gmail.com

 
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Replies
Joseph Tarzia
Member: 2017
Posts: 4

Subject: Re:Valuation assistance

Submitted on 07-19-17 11:59 am.
Message:

You may want to start by researching how firms in the same or comparable fields are valued.  Then determine the opporutinity your firm would offer to determine its value.

 
Eric Stevens
Member: 2011
Posts: 10

Subject: Re:Valuation assistance

Submitted on 07-19-17 12:11 pm.
Message:

Thanks.  I am struggling to find comparable firms.  But the reply is very much appreciated.  Eric

 
Fabiana Fakhoury
Member: 2013
Posts: 1

Subject: Re:Valuation assistance

Submitted on 07-24-17 2:52 pm.
Message:

Try looking into market size and potential market share, then assuming an optimistic and a realistic growth scenario. Using a DCF model, I would also recommend adding an iliquidity premium (depending on industry, between 15-25%) to the final value or simply to the discount rate. Assuming there are no comparables, this could be a good way to start.


Regards,


Fabiana Fakhoury


Feng-Sao Paulo


+5511 3568-2968 (office)


+5511 99388-6613 (mob)


 

 
Cody McCubbin
Member: 2017
Posts: 1

Subject: Re:Valuation assistance

Submitted on 07-25-17 9:42 am.
Message:

This will probably not help on this specific question, however, this might help on a longer term basis.

If you have a deeper interest in valuations Aswath Damodaran is the guru and offers free leasons and Youtube sessions of his classes.


http://pages.stern.nyu.edu/~adamodar/

https://www.youtube.com/channel/UCLvnJL8htRR1T9cbSccaoVw


It's basically his MBA class at Columbia.

Hope this helps

 
Eric Stevens
Member: 2011
Posts: 10

Subject: Re:Valuation assistance

Submitted on 07-25-17 12:24 pm.
Message:

Thanks

 
Susan Price
Member: 2004
Posts: 2

Subject: Re:Valuation assistance

Submitted on 07-26-17 7:12 pm.
Message:

Hi Eric.  I agree with Fabiana's approach.  As a practical matter, when making assumptions about market size etc, I have found that getting input from the target company managment and from the potential investor builds a lot of faith in the valuation.  The rest is just number crunching.


-Susan

 
Eric Stevens
Member: 2011
Posts: 10

Subject: Re:Valuation assistance

Submitted on 07-26-17 8:41 pm.
Message:

Thanks Susan.  We have a call set up with the CFO of the target to discuss market and their valuation assumptions.  Eric


 

 
Tim Flanigon
Member: 2012
Posts: 2

Subject: Re:Valuation assistance

Submitted on 08-01-17 7:13 pm.
Message:

Have you ever tried the website crunchbase? You may have to buy the one month subscription if you're looking for more filters. There are probably other websites where you can get this information but this site gives you the amount of the private funding rounds in one easy to see place. 


 


Tim Flanigon

 
Tim Flanigon
Member: 2012
Posts: 2

Subject: Re:Valuation assistance

Submitted on 08-01-17 7:13 pm.
Message:

Here's the Crunchbase website....


 


https://www.crunchbase.com/app/search/companies/4352595b3f67a67ee8e32a3f9ee3efac0c347960


 


 

 
Michael Letros
Member: 2017
Posts: 1

Subject: Re:Valuation assistance

Submitted on 08-31-17 12:48 pm.
Message:

Eric - An alternative way of valuing the investment is to model a) your expected rate of return on the investment and b) the expected equity stake that you're taking in the business.  Then extrapolate what market cap the company will need to achieve in order for you to hit your RoR target.  If that market cap seems reasonable, then the investment may make sense (...subject to other normal due diligence).  - Michael Letros

 
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