Valuation of Vc Deals
The Entrepreneurial Manager
VALUATION OF VENTURE CAPITAL DEALS
Bernardo Bertoldi
bbertoldi@escp eap.it bbertoldi@escp-eap.it
Candid Capital Partners We are a private equity firm that does not add value to its portfolio companies, but W i t it fi th t d t dd l t it tf li i b t rather seeks to boost returns through the egregious application of leverage and irresponsible gutting of corporate resources in search of cost savings. Our firm has always been a generalist, and our partners have no industry specialties to speak of, unless you consider willy‐nilly cold‐calling to be a specialty. We invest in the middle portion of the middle market, where the most competition resides. With each successive fund, we seek to raise enough capital such that we abandon familiar deal territory for larger, more complex transactions in which we have no familiar deal territory for larger, more complex transactions in which we have no track record. This strategy is intended to boost management fees and decrease our frightening reliance on performance fees as a method of wealth building. Our fund performances have consistently been in the bottom quartile, a status that is the result not of poor luck but of demonstrable lack of operating skills. Our founding partners, ages 74 and 81, have no plans to transition leadership of the firm to junior partners. The firm, in fact, employs no junior partners other than an administrative assistant (and third wife of a co‐founder) who organizes LP account d ( d h d f f f d ) h information using a series of legal notepads.
Copyright © Bernardo Bertoldi 2007
2
OBJECTIVE
¶ Discuss some of fundamental issues of valuation in venture capital deals • Venture capital method • Estimation of the terminal value • Risk analysis • Investment • Determinants of valutation ¶ Give an overviews of entrepreneurial companies that are financed either by venture capitalists or private equity investors
The valuation of Venture
VALUATION OF VENTURE CAPITAL DEALS
Bernardo Bertoldi
bbertoldi@escp eap.it bbertoldi@escp-eap.it
Candid Capital Partners We are a private equity firm that does not add value to its portfolio companies, but W i t it fi th t d t dd l t it tf li i b t rather seeks to boost returns through the egregious application of leverage and irresponsible gutting of corporate resources in search of cost savings. Our firm has always been a generalist, and our partners have no industry specialties to speak of, unless you consider willy‐nilly cold‐calling to be a specialty. We invest in the middle portion of the middle market, where the most competition resides. With each successive fund, we seek to raise enough capital such that we abandon familiar deal territory for larger, more complex transactions in which we have no familiar deal territory for larger, more complex transactions in which we have no track record. This strategy is intended to boost management fees and decrease our frightening reliance on performance fees as a method of wealth building. Our fund performances have consistently been in the bottom quartile, a status that is the result not of poor luck but of demonstrable lack of operating skills. Our founding partners, ages 74 and 81, have no plans to transition leadership of the firm to junior partners. The firm, in fact, employs no junior partners other than an administrative assistant (and third wife of a co‐founder) who organizes LP account d ( d h d f f f d ) h information using a series of legal notepads.
Copyright © Bernardo Bertoldi 2007
2
OBJECTIVE
¶ Discuss some of fundamental issues of valuation in venture capital deals • Venture capital method • Estimation of the terminal value • Risk analysis • Investment • Determinants of valutation ¶ Give an overviews of entrepreneurial companies that are financed either by venture capitalists or private equity investors
The valuation of Venture