Early Stage Valuation

Early Stage Valuation

by Antonella Puca
Released June 2020
Publisher(s): Wiley
ISBN: 9781119613633

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Book description

Addresses significant developments in the valuation of early stage enterprises at fair value with emphasis on practical applications—features a broad selection of case studies of early stage valuation

Early Stage Valuation: A Fair Value Perspective provides a comprehensive review of the current methodologies used to value Early Stage Enterprises (ESEs) at fair value for financial reporting, investment, and mergers and acquisitions. Author Antonella Puca, Senior Director with Alvarez & Marsal Valuation Services in New York, provides accurate, up-to-date information on recent guidelines and new approaches for valuation assessments.

This authoritative guide examines how to apply market analysis, discounted cash flows models, statistical techniques such as option pricing models (OPM) and Monte Carlo simulation, the venture capital method and non-GAAP metrics to ESE valuation. The text considers the most recent AICPA, Appraisal Foundation and IPEV guidance, and examines developments in both academic research and venture capital investor practice. Numerous real-world case studies illustrate early stage valuation suitable for structuring sound, internally consistent business transactions. Covering current trends and the latest regulatory guidance in the area, this book:

  • Provides step-by-step guidance on practical valuation applications
  • Reflects current standards for ESE valuation, including the AICPA Guide to the Valuation of Portfolio Company Investments, the IPEV guidelines and guidance from the Appraisal Foundation
  • Covers new approaches to the valuation of ESEs with option pricing models, Monte Carlo Simulation, calibration and non-GAAP metrics
  • Offers an overview of start-up valuation
  • Discusses how intangible assets are impacting the valuation of ESEs

The book also includes contributions from Neil Beaton, Andreas Dal Santo, Alexander Davie, John Jackman and Mark Zyla.

Early Stage Valuation: A Fair Value Perspective is an essential resource for valuation specialists, private equity and venture capital fund managers, analysts, attorneys, investment bankers, regulators and auditors, and investors with interest in the private equity and venture capital industry.

Table of contents

  1. Cover
  2. Acknowledgments
  3. About the Author
  4. About the Contributors
  5. Preface
  6. Introduction
  7. PART One: Early Stage Valuation in Context
    1. CHAPTER 1: Early Stage Enterprises and the Venture Capital Market
      1. CHARACTERISTICS OF EARLY STAGE ENTERPRISES
      2. THE VENTURE CAPITAL MARKET
      3. EXIT STRATEGY
      4. CONCLUSION
      5. NOTES
    2. CHAPTER 2: Fair Value Standard
      1. HISTORICAL NOTES ON THE FAIR VALUE STANDARD
      2. THE FAIR VALUE STANDARD UNDER CURRENT U.S. GAAP
      3. FAIR VALUE AND OTHER STANDARDS OF VALUE
      4. GUIDANCE ON THE FAIR VALUE STANDARD IN ESE VALUATION
      5. CONCLUSION
      6. NOTES
    3. CHAPTER 3: Capital Structure
      1. COMMON STOCK
      2. PREFERRED STOCK
      3. OPTIONS AND OPTION-LIKE INSTRUMENTS
      4. WARRANTS
      5. OTHER HYBRID INSTRUMENTS
      6. CONCLUSION
      7. NOTES
  8. PART Two: Enterprise Valuation
    1. CHAPTER 4: Seed Stage Valuation and the Venture Capital Method
      1. ANGEL INVESTORS AND THE MARKET FOR SEED INVESTING
      2. SEED VALUATION: THE SCORECARD APPROACH
      3. VENTURE CAPITAL METHOD
      4. THE FIRST CHICAGO METHOD
      5. CONCLUSION
      6. NOTES
    2. CHAPTER 5: The Backsolve Method
      1. THE OPM BACKSOLVE METHOD: A CASE STUDY
      2. SECONDARY MARKET TRANSACTIONS
      3. ESTIMATING OPM VOLATILITY
      4. CONCLUSION
      5. NOTES
    3. CHAPTER 6: Discounted Cash Flow Method
      1. DEVELOPING A DCF MODEL IN A SURVIVAL SCENARIO
      2. STEP 5: ADJUSTMENTS
      3. THE INVESTOR PERSPECTIVE: RECONCILING DCF RESULTS WITH THE VENTURE CAPITAL METHOD
      4. DCF MODEL AND CALIBRATION
      5. CONCLUSION
      6. NOTES
    4. CHAPTER 7: Asset Accumulation Method
      1. OVERVIEW OF THE ASSET-BASED APPROACH
      2. THE ASSET ACCUMULATION METHOD: A CASE STUDY
      3. IN-PROCESS RESEARCH AND DEVELOPMENT
      4. PUTTING IT ALL TOGETHER
      5. CONCLUSION
      6. NOTES
    5. CHAPTER 8: Non-GAAP Metrics in ESE Valuation
      1. NON-GAAP FINANCIAL MEASURES
      2. OTHER METRICS
      3. CONCLUSIONS
      4. NOTES
  9. PART Three: Valuation of Financial Instruments
    1. CHAPTER 9: Allocation of Enterprise Value
      1. SCENARIO-BASED METHODS
      2. CURRENT VALUE METHOD
      3. CONCLUSION
      4. NOTES
    2. CHAPTER 10: Valuation of Options and Warrants
      1. GENERAL PRINCIPLES OF OPTION VALUATION
      2. VALUATION OF OPTIONS IN A COMPLEX CAPITAL STRUCTURE
      3. VALUATION OF OPTIONS AS STAND-ALONE INSTRUMENTS: THE BSM MODEL
      4. VALUATION OF OPTIONS AS STAND-ALONE INSTRUMENTS: THE BINOMIAL LATTICE MODEL
      5. VALUATION OF WARRANTS
      6. CONCLUSION
      7. NOTES
    3. CHAPTER 11: Valuation of Debt Securities
      1. GENERAL PRINCIPLES OF DEBT VALUATION
      2. VALUATION OF CONVERTIBLE NOTES: DECOMPOSITION AND YIELD METHOD
      3. VALUATION OF CONVERTIBLE NOTES: CALIBRATION WITH THE YIELD METHOD
      4. VALUATION OF CONVERTIBLE NOTES: THE OPTION PRICING METHOD
      5. VALUATION OF CONVERTIBLE NOTES: CALIBRATION WITH THE OPM BACKSOLVE
      6. VALUATION OF CONVERTIBLE NOTES: BINOMIAL LATTICE MODEL
      7. VALUATION OF BRIDGE NOTES: “AS IF CONVERTED” METHOD
      8. VALUATION OF BRIDGE NOTES WITH WARRANTS
      9. VALUATION USING BROKER QUOTES
      10. VALUATION OF DEBT FOR THE PURPOSE OF VALUING EQUITY
      11. CONCLUSION
      12. NOTES
    4. CHAPTER 12: Valuation of Contingent Consideration
      1. TYPES OF EARNOUTS
      2. EARNOUT VALUATION
      3. CASE STUDIES
      4. CONCLUSION
      5. NOTES
  10. References
    1. STANDARDS
    2. INDUSTRY GUIDANCE
    3. INDUSTRY REPORTS
    4. U.S. SECURITIES AND EXCHANGE COMMISSION FILINGS
    5. BOOKS, ARTICLES, AND WEBINAR TRANSCRIPTS
  11. Index
  12. End User License Agreement

Product information

  • Title: Early Stage Valuation
  • Author(s): Antonella Puca
  • Release date: June 2020
  • Publisher(s): Wiley
  • ISBN: 9781119613633