• Valutico, a leading valuation software provider, is now offering EMIS comprehensive mergers and acquisitions data to help users better assess the deal landscape, drive deal flow and capitalise opportunities in the world’s fastest-growing markets.
• The integration unlocks access to over one hundred thousand transaction records within these markets and provides detailed data for financial professionals.
• With the rapid growth of the emerging markets, Valutico leads in catering to the growing need for robust valuation technologies to professionally assess businesses in these markets.
• Valutico’s platform offers personalized transaction recommendations, further positioning Valutico as a transformative player in emerging market valuations.

Valutico, a global leader in valuation software, has introduced new emerging market data from the EMIS database into its system. This upgrade provides finance professionals comprehensive and current data crucial for valuing firms in primary emerging markets, such as South America, Eastern Europe, the Middle East, and Asia. 

The swift growth of emerging markets surpasses that of developed economies, projected to hit an average rate of 4.0% by 2024 against the 1.4% prediction of the latter by the IMF. These markets present a wealth of diverse and undervalued investment prospects, highlighting the need for robust valuation technologies to accommodate the brisk growth and investor demand.

By integrating EMIS M&A transaction data, Valutico gives its clients access to an impressive archive of over one hundred thousand transactions for these dynamic emerging markets. The critical data equips financial professionals with relevant information for accurate business valuation and offers a verifiable benchmark for real-time transactions.

For these markets, Valutico offers exhaustive transaction essentials, which include announcement dates, involved parties, target nations, and industries. Users can also delve into in-depth deal specifics, like stake purchases, deal amounts, and crucial multiples such as EV/Sales, EV/EBITDA, EV/EBIT and P/E. Detailed information on deals, buyer profiles, and industry medians can also be found within the system, making it an impressive and full-bodied tool for finance professionals.

Offering this essential data solidifies Valutico’s position at the forefront of business valuations in emerging markets. It equips finance experts worldwide with rigorous data to dissect and unlock latent potential utilizing a method previously inaccessible to them. This move ultimately enhances their precision in evaluating businesses in these burgeoning economies while providing a solid benchmark for real-time transactions.

Supplementing the extensive deal database, Valutico’s platform is also programmed to offer personalized transaction recommendations. This is a significant feature meant to support valuation professionals with their transaction selection and to facilitate competitor research for financial advisors.

CEO of Valutico, Paul Resch, affirms, «Valutico’s EMIS M&A transaction data integration heralds a transformative era in emerging market valuations. It equips finance professionals with the essential tools to accurately and efficiently assess companies in these regions, enabling confident decision-making even in the most intricate and demanding markets. With Valutico’s latest advancement, we are extremely happy to be delivering on our promise to support professionals to make the best valuation decisions in all key global markets.»

Diego Obere, Managing Director of EMIS, states:

«EMIS is excited to partner with Valutico, bringing our leading emerging markets M&A intelligence to their clients and enhancing their transactions coverage of the world’s fastest-growing markets.» – 

About Valutico

Valutico is the world’s leading valuation software provider. Its platform empowers finance professionals to make informed business decisions with accurate and timely valuations. Valutico’s customers include professionals in Banking, M&A, Corporate Finance, Audit, Tax, Accounting, Private Equity, as well as  Venture Capital.

Learn more at www.valutico.com

Contact: Alex Harris – a.harris@valutico.com

About EMIS

EMIS is a leading curator of multi-sector, multi-country research for the world’s fastest growing markets. We provide a unique combination of research from globally renowned information providers, local and niche specialist sources, our own proprietary analysis, and powerful monitoring and productivity tools. EMIS delivers trustworthy intelligence for over 370 industry sectors and 11 million companies across 197 markets. Everything you need in one place where actionable insights are facilitated by leading technology.

EMIS is part of the ISI Emerging Markets Group, which has been in the business of providing information on high-growth markets for over 30 years. 

Learn more at www.emis.com

The post Valutico Leverages EMIS Transaction Data to Enable Better Valuations of Emerging Market Deals appeared first on Valutico.

• Valutico, a leading valuation software provider, has partnered with Eden Exchange, Australia’s premier M&A marketplace for SMEs.
• The partnership will provide Eden Exchange users with quick and easy indicative valuations of their businesses, empowering them to make more informed decisions about when to sell and for how much.
• Valutico’s cutting-edge software, MyValutico, will be integrated into Eden Exchange’s platform, enabling thousands of companies on Eden Exchange to perform quick, indicative valuations.
• Valutico’s analytics and data offering will be enhanced as a result of the partnership, making Valutico even more tailored for financial professionals in Australia and surrounding regions.

Valutico, a leading valuation software provider, today announced its partnership with Eden Exchange, Australia’s premier M&A marketplace for SMEs. This groundbreaking partnership will provide Eden Exchange users with quick and easy indicative valuations of their businesses, empowering them to make more informed decisions about when to sell and for how much.

Valutico’s cutting-edge software, MyValutico, will be integrated into Eden Exchange’s platform, enabling thousands of companies on Eden Exchange to perform quick, indicative valuations. The software will also customize the valuation questionnaire, asking only pertinent questions informed by the data already collected by Eden Exchange.

The partnership will allow Eden Exchange to provide its users with a quick and easy way to get an estimate of the value of their business, without having to commission a full valuation report. This will help users to make more informed decisions about when to sell their business and for how much, at an early stage in the buy-sell process. 

The indicative valuations will be generated using Valutico’s proprietary valuation software, which is based on a variety of factors, including the company’s financial performance, industry, and location. 

In addition, it is planned that Valutico will get access to proprietary anonymized transaction data from Eden Exchange. This data will be used to enhance Valutico’s analytics and provide insights based on location, industry, and description, making Valutico’s software even more valuable and tailored, particularly for finance professionals in Australia and the surrounding regions. 

«Valutico’s mission is to make company valuation more accessible and understandable. Collaborating with Eden Exchange aligns perfectly with that mission,» said Paul Resch, CEO of Valutico. «This partnership not only expands our reach into the Australian market but also adds significant value to our data analysis, ultimately benefiting our customers.»

As both companies move into the future, they look forward to a long-term partnership.

Dhanush Ganglani, Managing Director at Eden Exchange also noted:

«Partnering with Valutico is another step towards revolutionising the way people are able to buy and sell businesses. Valutico’s technology leverages proprietary data on precedent transactions, democratising valuable information about public and private markets that is usually only available to the world’s top firms. Combining Valutico’s market-leading business valuation technology with Eden Exchange’s virtual deal room, DealXchange, allows us to provide more transparency to business buyers and sellers, helping them better understand the true value of a business.» – 

About Valutico:

Valutico is a valuation software company that offers cutting-edge solutions for businesses. Their software empowers users to perform valuations efficiently, accurately, and quickly, providing valuable insights for informed decision-making.

About Eden Exchange:

Eden Exchange is passionate about building an active community of buyers, deal makers, partners and sellers to enable successful transactions for all parties. We are actively working to revolutionise the way businesses are bought and sold, transforming the processes involved and ensuring that there is greater transparency and flexibility for anyone who is looking to buy or sell a business.

The post Valutico and Eden Exchange Team Up to Make Company Valuation More Accessible for SMEs appeared first on Valutico.

• Valutico launches a new «Notes» feature to document decisions and assumptions in valuations.
• The feature empowers users to justify and communicate valuation inputs to third parties effectively.
• Users can take comprehensive notes, facilitating internal reflection and collaboration with colleagues.
• The new feature now means Valutico provides users both “numbers” and “narratives” to add important depth to each valuation.

Valutico is excited to introduce its latest feature, «Notes,» designed to address the critical need for documenting decisions and assumptions in valuations. The new functionality aims to empower users to justify and communicate their valuation inputs effectively to third parties, such as clients, courts, and potential buyers.

Justifying Valuation Inputs Made Easy

Valuation processes often rely on standardized methodologies, but the decisions and assumptions underlying these valuations are highly subjective. When presenting a valuation to external parties, users frequently face the challenge of justifying specific decisions or assumptions made throughout the process. This could include explaining the selection of peers, rationale behind forecasts, or adjustments made during the quality assurance phase.

To overcome this challenge, Valutico’s new feature enables users to document decisions and assumptions directly within the platform. Users can take comprehensive notes to remind themselves of the reasoning behind specific choices or areas that require further analysis. This documentation not only facilitates internal reflection but also serves as a valuable resource for discussing decisions and assumptions with colleagues working on the valuation.

«We recognize the importance of providing our users with the tools they need to justify their valuations and enhance trust in their work,» said Paul Resch, CEO at Valutico. «Our new feature allows users to document decisions and assumptions comprehensively, empowering them to demonstrate their expertise, professionalism, and preparation.»

Seamless Integration For an End-to-End Valuation Workflow

The new functionality caters to a diverse range of users who require robust documentation capabilities. Notetaking facilitates collaboration and discussion among team members, providing a platform to explain and share rationales. But users can also leverage the solution to present well-structured and professional justifications for their valuations to clients or other stakeholders, even when they don’t have access to the underlying spreadsheet-based model.

Currently, users resort to workarounds such as maintaining separate documents for note-taking. Valutico’s new feature eliminates the need for third-party tools and consolidates all documentation within the platform, aligning with the company’s commitment to an end-to-end valuation workflow.

By introducing this feature, Valutico aims to improve user experiences and enhance trust in valuations. Users will also be able to export the comprehensive documentation as part of their reports as part of a planned update in an upcoming phase, which will foster transparent communication with third parties and showcase the thought process behind their valuation inputs.

Key New Note Features

Core Features of Valutico’s New Note Taking Product Feature:

Comprehensive Note-Taking:
Users can take notes at various stages of the valuation process, including the qualitative assessment, peer choice, valuation methodology selection, and parameter adjustments.

Documentation of Decisions and Assumptions:
The feature allows users to document the rationale behind specific decisions and assumptions made in the valuation. This documentation helps justify inputs to third parties, such as clients, courts, and potential buyers.

Collaboration and Discussion:
For internal users, the feature facilitates collaboration and discussion among team members. Users can explain their rationales and share notes with colleagues, enhancing teamwork and understanding.

Seamless Integration within Valutico:
The note-taking feature eliminates the need for third-party tools or Excel spreadsheets. Users can keep all their documentation within the Valutico platform, aligning with the platform’s end-to-end valuation workflow.

Filter by Stage:
Users can filter for specific notes within valuations, making it easy to find relevant information when reviewing or sharing valuations. The ability to add, remove, and edit notes ensures that users always have an updated set of notes.

To explore this new feature further, we invite you to book a demo and connect with one of our Valutico experts.

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• Valutico’s latest launch, ValutECO, empowers finance professionals to conduct valuations based on ESG criteria
• Companies with higher ESG scores can receive higher company valuations
• ValutECO is launched in an alpha trial phase to invite feedback

Leading the way in sustainable finance, Valutico has launched ValutECO, an advanced tool that assesses the value of companies based on their environmental impact. With this groundbreaking announcement, the valuation platform Valutico has made a significant step into integrating sustainability into the widespread practice of valuing businesses.

Valutico’s newly launched tool, currently in an ‘alpha’ trial phase, allows accountants, M&A consultants, investment managers, private equity professionals, and those in corporate finance to consider the impact of Environmental, Social and Governance (ESG) factors on a company’s value. By addressing the potential links between ESG and financial performance, ValutECO is leading the way towards incorporating sustainability into financial theory and practice.

ValutECO Explained

With ValutECO, financial professionals use a streamlined ESG assessment, specifically designed with small and medium-sized enterprises (SMEs) in mind and simplified to facilitate easier reporting. Analysts can identify priority areas for improvement, such as reducing greenhouse gas emissions, managing water usage, and increasing recycling rates. 

Valutico’s pioneering new tool integrates ESG scores into the ‘Cost of Capital’ component of a Discounted Cash Flow (DCF) valuation. This revolutionary feature allows companies with positive ESG scores to be valued higher, making them more attractive to potential buyers and investors seeking sustainability and long-term growth.

ValutECO was developed following a grant by Wirtschaftsagentur Wien, and follows research into the impacts of ESG criteria on the valuations of businesses across multiple industries, alongside validation that the condensed ESG assessment reflects more exhaustive assessments on the market. 

Impact on Sustainability

The widespread adoption of a tool like ValutECO has the potential to be a game-changer for sustainability in industries all around the world. It would financially incentivize companies to prioritize sustainability and embed environmental factors as a key component of their everyday operations. This would result in one way in which companies’ impact on the planet becomes a crucial aspect of buying, selling, and investing decisions.

Valutico acknowledge that the integration of ESG into financial analyses is an ongoing conversation requiring further academic study, but they’re optimistic that their new tool ValutECO will contribute to steering the conversation in the direction of a more sustainable future.

Valutico’s CEO, Paul Resch states:

«Leading the way in integrating sustainability into financial practices is a significant accomplishment for Valutico. We recognize the importance of ValutECO as an initial step towards achieving this goal, and we’re grateful for the grant provided by Wirtschaftsagentur Wien that made this possible. We’re looking forward to receiving feedback from financial professionals on how this innovative tool can enable sustainable growth and we’re excited for what lies ahead.»

Alpha Phase: Valutico appreciate that a universally accepted standard for ESG scoring, nor ESG valuation analysis, currently exist. As such, ValutECO has been launched as a working and viable early-stage tool, and further development is anticipated following user feedback, and ongoing research. 

The post ValutECO is the New Groundbreaking ESG Tool for Sustainable Business Valuations appeared first on Valutico.

What is ValutECO?

A tool that allows financial professionals to incorporate Environmental, Social and Governance (ESG) aspects in the valuation of a company.

How does ValutECO work?

Users complete a streamlined ESG assessment of the target company to arrive at an ESG score. The ESG score feeds into our proprietary algorithm to derive an appropriate adjustment to the Cost of Equity and Cost of Debt, which impacts the final valuation.

Who is ValutECO for?

All finance professionals who value companies, such as accountants, auditors, tax advisors, M&A professionals, investment managers, corporate finance advisors, and banks who want to consider ESG factors as part of their decision-making process, especially as an input to the valuation.

How are the Cost of Capital adjustments calculated?

Valutico developed a proprietary Cost of Capital adjustment algorithm, based on the ESG scores of listed companies, obtained from S&P Capital IQ. We performed a detailed linear regression analysis, considering the betas and credit spread of listed companies, regressed against their ESG scores, for the universe of listed companies globally. The ESG score of the target company is then fed through the algorithm to arrive at Cost of Capital discount or premium, which in turn will affect the Discounted Cash Flow valuation result.

The higher the ESG score, the higher the Cost of Capital discount, which results in a lower overall Cost of Capital and thus a higher valuation. For very low ESG scores, the algorithm will apply a Cost of Capital premium, increasing the overall Cost of Capital and thus decreasing the valuation.

As a general rule of thumb, ValutECO will generally apply a ~0.08% discount to the Cost of Equity and a ~0.09% discount to the Cost of Debt for every 10 point improvement in a company’s ESG score.

Similarly to the Qualitative Assessment, it is up to the discretion of the user as to whether they wish to use these specific discounts or premiums in their final valuation. The ESG industry is relatively nascent and thus, as a new tool, this approach is not yet a widely adopted standard across the industry.

ValutECO is still in Alpha Phase – what does this mean?

Valutico appreciates that neither a universally accepted standard for ESG scoring, nor a universally accepted standard for ESG valuation analysis, currently exist. As such, we are launching ValutECO as a viable tool at an early stage of development, to solicit feedback, work closely with users to understand their needs in this area and develop ValutECO into a tool that could be more widely adopted. Notably, this means ValutECO can be considered as still under development and subject to change at any time.

Do I need a Valutico subscription to use ValutECO?

Yes, in order to access ValutECO you need a subscription to the Valutico valuation platform.

I do not have a subscription to ValutECO, how do I use ValutECO?

You will need access to Valutico to use ValutECO. Within the platform it features as an optional step. Users can also utilise the ESG assessment component by itself, without applying any ESG adjustment , in case they wish to conduct their standard valuation but still discuss ESG issues with their clients separately. If you are a Valutico user, read the next FAQ response for more information.

I am a Valutico user, how do I use ValutECO?

If you’re a Valutico user, reach out to customer service and they can provide you access. ValutECO’s launch add-on price point is established at between $200 – $500, with 100% of sales being donated to the World Land Trust Charity, patroned by David Attenborough. Valutico extends a cordial invitation to contribute beyond the stipulated amount.

Once you have access to ValutECO, a new step will be added to the valuation workflow. Upon entering this step, you have the choice to start or skip the ESG assessment. In the former case, you will conduct a short 29-question ESG assessment, which provides an overall ESG score, as well as dimension scores for E, S and G. Your overall ESG score has an impact on the Cost of Capital, which impacts the discount rate applied to all DCF-based valuation approaches. You may also choose to conduct the ValutECO assessment for informational purposes, but not apply any Cost of Capital adjustments. In order to do so, simply deactivate the toggle on the ValutECO result screen, or in the parameters on the valuation screen.

Where do I see the impact in Valutico’s valuation platform?

If activated, the Cost of Equity and Cost of Debt adjustments will be shown in the Discount Rate table on the Valuation screen, per the screenshot below:

How can we advise clients of the impact of the ESG report?

There are at least two ways you might want to use this tool with clients:

1. Demonstrate their ESG score, in order to discuss which aspects across Environmental, Social and Governance dimensions they should be aware of, in order to future-proof the value of their business
2. Indicate the difference between a valuation that incorporates the ESG score into the valuation, versus one that does not. This might be a positive or negative impact, showing the effect of certain ESG aspects on the value of the business

Is the streamlined ESG survey consistent with longer-format ESG surveys?

Yes, the condensed ESG survey is broadly consistent with the S&P Capital IQ ESG scoring mechanism, but is focused on SMEs as opposed to large, listed companies.

When would you recommend using ValutECO?

We built the ValutECO methodology with private SMEs in mind, for which complex probability-weighted ESG cashflow scenarios might pose an insurmountable or expensive challenge. We want to lower the barrier to ESG adoption for these types of companies. The questionnaire is purposely kept as broadly applicable as possible.

Some notable use cases for ValutECO include:

• Sell-side M&A: showcase the positive impact of a good ESG performance and justify an elevated valuation
• Private Equity: showcase the positive impact of a good ESG performance and justify an elevated valuation; satisfy ESG requirements by your LPs
• Sustainability / Management consulting: help clients understand ESG is not just a soft factor, but translates into tangible value

When would you recommend NOT using ValutECO?

Users should not use the Cost of Capital adjustments generated by ValutECO if their forecasts already include ESG impacts, in order to avoid double-counting.

The post ValutECO – FAQs appeared first on Valutico.

• Popular Valuation platform announces launch of new method for valuing businesses with stable earnings
• Favored by business brokers, the capitalized earnings method is often used to help determine a valuation in the selling and buying of businesses
  

Valutico has today launched has today launched its latest product offering: the Capitalized Earnings Method, developed to value companies with stable earnings. This new announcement means financial professionals can now adopt this method within Valutico’s streamlined digital tool.

Following increasing demand, Valutico’s adoption of the Capitalized Earnings Method is expected to be especially welcomed in the US, Canada and Australia, where the method is particularly popular, and the announcement may prove compelling for business brokers who often use this assessment in support of the sale of sole proprietor businesses.

The Capitalized Earnings approach is a so-called ‘intrinsic’ valuation method, and is sometimes considered a simplified version of the common Discounted Cash Flow (DCF) analysis, involving fewer assumptions about the future cash flows of the business. In particular, it relies more on historical earnings to help determine a value, rather than the analyst’s subjective financial projections. It is widely used by valuation practitioners across the US and Canada, as well as in Australia, India and other regions of the world.

Following Valutico’s announcement, a once highly labor-intensive and complex process has been significantly simplified for Valutico’s users, meaning a real impact for the finance firms relying on the platform in more than 70 countries around the world.

The Capitalized Earnings Method is featured alongside eight other leading valuation techniques within Valutico, including different variations of the aforementioned DCF, as well as trading and transaction comparables, and the recently released Venture Capital (VC) method for valuing startups.

Paul Resch, Founder & CEO, states:

«We’re once again thrilled to announce yet another valuation method in our platform, with our integration of the popular Capitalized Earnings Method. We are proud to add this approach to our growing selection, and we know that this new feature, alongside many other recent developments, is going to serve our growing user base well. This expansion is a great example of us listening closely to our customer’s demands, to create a powerful product the market needs.»

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• New Venture Capital (VC) method allows faster valuations of mid- to late-stage startups

Valutico has once again made finance professional’s lives easier by announcing the launch of the Venture Capital (VC) method for valuing start-ups, available for the first time within its online platform.  

Although there are more than 4,000 active VC firms globally, valuing start-up companies remains problematic because traditional valuation methods don’t always work. Valutico’s team has developed an online solution that incorporates data from over 50,000 peer companies, and hopes to help overcome this issue faced by valuation professionals around the world.

As some recent start-up valuations are falling amidst investor caution, this new development comes at an opportune time to positively impact how effectively financial firms value young businesses. Already helping more than 450 financial firms perform over 10,000 valuations each year, Valutico’s new development also opens the door for valuing loss-making businesses, for which the VC method is also apt.  

CEO of Valutico, Paul Resch stated:

“We’re extremely excited to announce the new VC method as part of Valutico’s ever-expanding toolbox. We’re particularly happy that this represents a significant increase in our offering for Venture Capital and Corporate Finance firms across the 70 countries Valutico is already being used in. With all the calculations and relevant data in one place, the VC method will help make these types of mid- and late-stage start-up valuations much easier.”

One difficulty with valuing start-ups is that they have less financial history behind them. In contrast to other techniques, the VC method focuses instead on the VC firm’s desired rate of return as a key component of the valuation, and so allows new businesses that may still be loss-making, to be valued more effectively than with traditional methods such as a discounted cash flow (DCF).

VC firms invest in start-ups to gain a return on their investment, whereas M&A and Corporate Finance firms are interested in valuing new businesses with growth potential for a wide range of reasons. With Valutico’s new development, practitioners can quickly perform a VC valuation based on EV/Sales, EV/EBITDA, EV/EBIT and P/E multiples as a useful addition to other research on the company and the industry. With a highly active start-up sector even within an uncertain economic climate, valuing new businesses remains a vital task for a wide range of finance professionals.  

For demonstrations please contact Head of Marketing, Alex Harris.

Have Questions About the VC Method?

What is the VC method?

The Venture Capital (VC) method is an assessment for valuing start-up and high growth businesses. It is based on the company’s projected earnings at a certain future date, taking into account the money multiple and associated rate of return the investor would like to earn on their investment, assuming they will exit the investment at a specified future date.  

The VC method calculates the exit valuation at the specified future date by applying the observed multiples (EV/Sales, EV/EBITDA, EV/EBIT and P/E) of comparable listed companies and comparable transactions to the target company’s future earnings.

Taking this exit value into account, it then determines the price at which the investor can invest today in order to achieve their target money multiple and associated Internal Rate of Return (IRR).

How does the VC method work?

The default multiple is the average of the median of the comparable listed companies and the median of the comparable transactions. The default multiple can be overwritten by the user within the Valutico platform.

The default time horizon is 5 years, which can also be overwritten by the user. The chosen multiple is applied to the target company’s forecast earnings at the chosen forecast year to determine the exit value. 

The user is also required to specify a money multiple that an investor will require over the specified time horizon. The money multiple determines the IRR, which is used as the discount rate to discount the exit value and arrive at the valuation (as of the valuation date).

Will this value early-stage start-ups?

While the VC method can be used to value early-stage start-ups, it is not often the preferred approach due to the significant uncertainty attached to the forecast cash flows resulting in very high money multiples and IRRs required to compensate the investor for such risk. 

How accurate are the valuation figures?

It’s notoriously difficult to value new businesses accurately, and any method is fraught with some uncertainty. However, using a method like the VC method does provide a systematic way to arrive at a valuation range, and so it represents a useful tool to produce a figure that takes account of the perception of risk, the expected return, the projected earnings, and similar peer companies.

Is the Valutico platform suitable for VC investors?

If you use Valutico regularly, either to perform valuations on multiple companies, or to update or iterate multiple valuations, then Valutico can be extremely helpful because of how it speeds up this time-intensive process.

How are the calculations performed?

The Entry Value (EntV) is calculated by discounting the Exit Value (ExV) at the specified future year (t) at the IRR, as follows:

EntV = ExV(1+IRR)t

What data is used for the companies ‘comps’ comparisons?

We use different leading providers of public and private company data to come up with our expectations for reasonable exit multiples.

What are the limitations of using a traditional method like a DCF to value a new business?

While the DCF also discounts future cash flows to a present value today, it does so using discount rates typically calculated using the Capital Asset Pricing Model (either Weighted Average Cost of Capital (WACC) or Cost of Equity (CoE)). The calculation of these discount rates are based on the observed betas of similar listed peer companies. These companies, being listed, are mostly large, mature companies which means that the WACC that is calculated is normally very low (reflecting the lower risk of large, listed companies compared to the start-up in question). 

For growth or mature SMEs, this discrepancy between the WACC of listed vs private companies is accounted for with a Cost of Equity Premium. The CoE Premium is meant to capture the additional risk between the peer group of listed companies and the target company. When valuing startups, the challenge is that, in order to arrive at a realistic valuation, the CoE Premium can become very large (sometimes resulting in a doubling or even tripling of the original WACC).

It can therefore be a much simpler analysis to do away with the WACC as a discount rate and focus on the IRR of what a potential investor would like to achieve when making a VC or early stage investment.

Which parameters can I change in the VC method in Valutico?

You have control over the time horizon for which you are interested in this business, the amount of return you would expect to make over the entire time period, which ultimately determines the expected investor Internal Rate of Return (IRR), as well as full control over every exit multiple: EV/Sales, EV/EBITDA, EV/EBIT, and P/E.

Did Valutico invent this method?

As much as we would love to take credit for it, the Venture Capital method was developed by Harvard Business School Professor Bill Sahlman in 1987.

Is it worth purchasing Valutico just to use the VC method?

We recommend subscribing to Valutico if you regularly value businesses, and you want to save yourself time by having easy access to a tool that speeds up the process of accessing relevant data, and exporting reports instantly. However, if you only do one or two valuations a year, and you’re interested in a once-off valuation, you can reach out to our valuation services team who support our clients by providing once-off valuations. 

If you want to learn more about the VC Method, book your demo here.

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