Setting value of young company is more art than science
| April 24, 2008 |  View for printing |
As a venture capitalist, one question I get asked all the time is "How do you value an early-stage company?" The truth is that there really aren't many tools.
Later-stage companies often are valued based upon metrics such as discounted cash flows and revenue or earnings multiples. The challenge is that many of the start-ups we invest in don't even have revenue, never mind earnings.
Trying to establish the value of an early-stage company is complicated by many factors: There is very little operating history, forecasts are guesses at best, products are usually still in development stages and markets may not be developed, the investments are highly illiquid, and lastly, first-time entrepreneurs tend to have an inflated sense of value.
Mark Solon is managing partner at Highway 12 Ventures http://www.highway12ventures.com/ in Boise. - Special to the Idaho Statesman
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