Valuing Early Stage and Venture Backed Companies

Notes

CHAPTER 2 Understanding Early Stage Preferred Stock Rights

1 National Venture Capital Association. http://www.nvca.org/pdf/Q2_08_Exits_Release.pdf.

2 Dow Jones Venture Capital Deal Terms Report, November 2008, Dow Jones & Company, Inc.

CHAPTER 3 Enterprise Valuation Approaches

1 Final Regs, 409A, paragraph 4(c)i.

CHAPTER 4 Application of the Option-Pricing Method in Allocating Enterprise Value

1 Source: Thompson Financial Data VentureExpert database.

2 See Grabowski, Roger J., “Cost of Capital Estimation in the Current Distressed Environment,” Journal of Applied Research in Accounting and Finance, Vol. 4, No. 1, pp. 31-40, 2009.

CHAPTER 5 Application of the Probability-Weighted Expected Returns Method in Allocating Enterprise Value

1 Updated U.S. Private Equity Valuation Guidelines, March 2007. Available at www.peigg.org/images/2007_March_Updated_US_PE_Valuation_Guidelines.pdf.

2 “Private Equity Returns: An Empirical Examination of the Exit of Venture-backed Companies,” Sanjiv R. Das, Murali Jagannathan, and Atulya Sarin, Journal of Investment Management, Vol. 1, No. 1 (2003).

3 In practice, I have encountered resistance in audit reviews to my use of discounts for lack of control (DLOC). The rationale for their refusal of a DLOC is a 2004 SEC speech by Todd Hardiman, which I have found to be misinterpreted and misunderstood. I cover this topic in more detail in Chapter 6, so for purposes of this PWERM, I ignore this discussion and resistance.

4 The weighted average strike ...