Venture capital In need of new valuation tools?

[pnbchari]

Venture capital investments have become a major contributor the growth of start-up firms.
Investing in start-up firms carries a substantial risk of failure, only a minority of start-ups is
high-return investments. This put great responsibility to the valuation methods used by the
venture capital firm. It is argued that when uncertainties about future pay-offs are high tra-
ditional valuation tools are of little help, they are said to be too static and not to comply
with change. A valuation method that is alleged to act in accordance with a changing envi-
ronment where uncertainty is high is real option which is said to consider these variables,
thus giving a more accurate valuation. The structure of venture capital funding can be seen
as well suited for real option valuation. :SugarwareZ-019:

 

[bhautik.kawa]

Venture capital investments have become a major contributor the growth of start-up firms.
Investing in start-up firms carries a substantial risk of failure, only a minority of start-ups is
high-return investments. This put great responsibility to the valuation methods used by the
venture capital firm. It is argued that when uncertainties about future pay-offs are high tra-
ditional valuation tools are of little help, they are said to be too static and not to comply
with change. A valuation method that is alleged to act in accordance with a changing envi-
ronment where uncertainty is high is real option which is said to consider these variables,
thus giving a more accurate valuation. The structure of venture capital funding can be seen
as well suited for real option valuation. :SugarwareZ-019:

Hey Friend,

I am also uploading a document which will give more detailed explanation on the New Venture Valuation by Venture Capitalists.

Thank you!