CHAPTER 7
If Valuation Can't Make You Money, Do You Really Need It?
Learning Practical Applications from Kayak.com
For many people, truly understanding a complex topic is best achieved by experiencing it first-hand. With the previous cases and methods presented thus far, you should be able to do the following:
1. Make more money as an investor by recognizing potential valuation conclusions that create opportunities for arbitrage and “abnormal” profits.
2. Make more money as a practitioner by better appreciating the perspectives of the market participants, both hypothetical ones and actual ones, and adjusting valuation inputs and methods to enlighten the parties that depend on your insights and expertise.
3. Make more money as a founder, employee, or executive by ensuring that you and your team (be it your managers, your family, your advisors, or others who influence your decisions) have several ways of comparing the “fairness” of compensation awards based on the way known risks and expected benefits have been distilled into an exercise price, or value that determines the grant price of your options.
As discussed, the vast majority of VCs, CFOs, founders, attorneys, angels, and other parties that come into contact with a 409A valuation, the most popular form of an independent venture-backed company appraisal, believe they've received a compliance-driven commodity. Most have indicated that they essentially see 409A valuations as a prophylactic against severe tax penalties and, ...
