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Venture Capital Valuations

Corporate Valuations Using the “VC Method”

The methods and assumptions inputted into any corporate valuation are as vast and varied as business itself. However, there are a few methods for valuation which are more simple to understand, common to most finance professionals and easy to use. The Venture Capital Valuation Methodology is one such process. This method does not suit later stage corporations whose cash flows have been at constant growth trajectories for decades, but is more suited for early-stage companies looking to put a dollar figure to their hopeful growth trajectory.

The Venture Capital method is often considered overly simple. However, in most instances where it is used, this is absolutely necessary. For instance, many early stage ventures are highly uncertain about product or service demand or even if they will be around in a few years. Consequently, VC valuations often include what has been routinely coined as a “fudge factor” discount rate–one which is large enough to take into account the risk undertaken to start the venture.

While the “VC Method” can be considered much more simple, it does not mean that it takes simple minds to calculate the growth trajectory of early stage operations. Quite to the contrary. Such early stage companies require a great deal of creativity to determine how the business will be valued going forward. That’s where we come in. We offer the perfect mix of creative thinking and technical know-how to perform a proper valuation on your early stage venture. Contact us today to find out more.