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A NOTE ON VALUTAION IN ENTREPRENEURIAL SETTINGS1 This note addresses valuation issues that are relevant to entrepreneurial settings. In valuing any investment opportunity from a startup-up to a mature company, it is always worthwhile to use the APV and/or WACC methods as taught in class. In addition, it also is generally useful to use a comparable company or multiple based approach. The APV, WACC and comparable methods deliver values that are appropriate when a company or investment is valued by a capital market that is relatively liquid and well-behaved. The valuation of investments in private companies - particularly start-ups - generate additional problems, concerns and questions that are not generally present in valuing public companies. A number of methodologies and institutions have evolved to deal with these problem and concerns. This note will describe, discuss, criticize, and, hopefully improve upon some of those methodologies. The Venture Capital Method A. Calculation The venture capital (VC) method...

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