Early Stage Valuation A Fair Value Perspective

Valuation is one of the more complex and challenging aspects of investment finance. In the case of early stage enterprises (ESEs), there are special considerations that give the valuation task a unique character. Early stage valuation is driven by a vision for the future of a company—be it a new venture still in the planning phases or a multi-billion-dollar “unicorn” that has yet to reach profitability. Vision and insight are notoriously difficult to quantify, as is the true risk of failure in the early stages. Early Stage Valuation: A Fair Value Perspective provides an introduction to key concepts in ESE valuation and a mirror to gain insight and align perspectives on valuation practice.

Given the forward-looking nature of ESE value, it is not surprising that considerable controversy exists around how best to account for the worth of these high-growth ventures. By focusing on Fair Value—a comprehensive set of valuation and financial reporting principles with global acceptance—Antonella Puca provides a broad perspective with immediate practical utility for investors, financial analysts, valuation professionals, and other practitioners in the venture-capital space. The text also incorporates guidance from academic studies and recently released guidelines from leading professional organizations, including the AICPA, the Appraisal Foundation, the International Private Equity and Venture Capital Board, the International Valuation Standards Council, the Alternative Investment Management Association, and others. The result is a guide to applying ESE valuation techniques that aligns with the current state of the practice worldwide.

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.