Venture Valuation at TU Darmstadt | Flashcards & Summaries

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Lernmaterialien für Venture Valuation an der TU Darmstadt

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TESTE DEIN WISSEN
According to which factors can company foundations be categorized?
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TESTE DEIN WISSEN
1) degree of independence of the founders 2) structural existence 3) growth potential 4) innovation degree of the company
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TESTE DEIN WISSEN
What are the characteristics of young companies?
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TESTE DEIN WISSEN
1) short representative history 2) resources scarce (financial resources/ human capital) 3) high importance of immaterial items --> knowhow, data, software code, customer base 4) high flexibility requirements 5) high risks but at the same time high chances (downside risk, upside potential)
Lösung ausblenden
TESTE DEIN WISSEN
Describe the enterprise value multiple "non-financial indicators".
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TESTE DEIN WISSEN
- dependent upon the industry, often used: number of customers - can be useful for young high growth companies - no consideration of the profitability of the company - often volatile - careful selection required and usage only in conjunction with financial indicators
Lösung ausblenden
TESTE DEIN WISSEN
What is the first step when calculating peer group multiples? Describe it.
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TESTE DEIN WISSEN
Target company analysis - qualitative analysis, e.g. maturity, how good is technology/ entrepreneurial team - quantitative analysis, e.g. rentability or liquidity performance indicators --> in order to determine to which company to compare to
Lösung ausblenden
TESTE DEIN WISSEN
Describe the difference between cost of equity and cost of debt.
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TESTE DEIN WISSEN
- Cost of equity = using a proxy for the market risk premium (based on capital market models) --> most often used: CAPM - Cost of debt = average interest rate of debt issued; average market cost for new debt issued (debt beta)
Lösung ausblenden
TESTE DEIN WISSEN
Differentiate the types of future multiples.
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TESTE DEIN WISSEN
Today's multples & expected performance indicators of the target - assumption: multiples remain constant over time - future value to be discounted: equity value multiples (cost of equity), enterprise value multiples (WACC) Expected performance indicators of comparable companies & the target - expected performance indicators of comparable companies required - no future value is calculated and, therefore no discounting is required
Lösung ausblenden
TESTE DEIN WISSEN
Name equity and enterprise value multiples.
Lösung anzeigen
TESTE DEIN WISSEN
Equity value multiples = earnings, earnings growth, book value of equity Enteprise value mutiples = financial, non-financial - financial = revenue, EBITDA, EBIT, free cash flow, book value of total capital
Lösung ausblenden
TESTE DEIN WISSEN
How does the estimation of future cash flows work? What are difficulties?
Lösung anzeigen
TESTE DEIN WISSEN
- Analysis of the past in order to extract knowledge about relevant markets and strengths and weaknesses of the company --> observe cash in- and outflows and their influence factors - difficult to do this for startups as there are only a few data from the past and there are a lot of investments at the beginning
Lösung ausblenden
TESTE DEIN WISSEN
What has to be considered regarding VC financing and investments in different years?
Lösung anzeigen
TESTE DEIN WISSEN
the value of what you invested in 2009 e.g. was different to 2011 --> if company value increases a lot: up-round --> in next round, value is higher so that you need to invest more money in order to get one share
Lösung ausblenden
TESTE DEIN WISSEN
What are the requirements for a new venture valuation?
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TESTE DEIN WISSEN
1) Forward looking 2) Realistic portrayal: Flexibility, Downside risk & Upside Potential 3) User friendliness: data availability & reliability, complexity & transparency 4) acceptance
Lösung ausblenden
TESTE DEIN WISSEN
Describe the new venture valuation requirement "User friendliness".
Lösung anzeigen
TESTE DEIN WISSEN
- data is a problem as there are ususally no reliable data from the past - low complexity = good applicability - transparency in order to avoid valuation and interpretation errors -> how transparent is the value one came up with?
Lösung ausblenden
TESTE DEIN WISSEN
Describe the requirement "Flexibility" for new venture valuation.
Lösung anzeigen
TESTE DEIN WISSEN
leadership might react flexible regarding a changing environment --> this option needs to be considered in the valuation method
Lösung ausblenden
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Q:
According to which factors can company foundations be categorized?
A:
1) degree of independence of the founders 2) structural existence 3) growth potential 4) innovation degree of the company
Q:
What are the characteristics of young companies?
A:
1) short representative history 2) resources scarce (financial resources/ human capital) 3) high importance of immaterial items --> knowhow, data, software code, customer base 4) high flexibility requirements 5) high risks but at the same time high chances (downside risk, upside potential)
Q:
Describe the enterprise value multiple "non-financial indicators".
A:
- dependent upon the industry, often used: number of customers - can be useful for young high growth companies - no consideration of the profitability of the company - often volatile - careful selection required and usage only in conjunction with financial indicators
Q:
What is the first step when calculating peer group multiples? Describe it.
A:
Target company analysis - qualitative analysis, e.g. maturity, how good is technology/ entrepreneurial team - quantitative analysis, e.g. rentability or liquidity performance indicators --> in order to determine to which company to compare to
Q:
Describe the difference between cost of equity and cost of debt.
A:
- Cost of equity = using a proxy for the market risk premium (based on capital market models) --> most often used: CAPM - Cost of debt = average interest rate of debt issued; average market cost for new debt issued (debt beta)
Mehr Karteikarten anzeigen
Q:
Differentiate the types of future multiples.
A:
Today's multples & expected performance indicators of the target - assumption: multiples remain constant over time - future value to be discounted: equity value multiples (cost of equity), enterprise value multiples (WACC) Expected performance indicators of comparable companies & the target - expected performance indicators of comparable companies required - no future value is calculated and, therefore no discounting is required
Q:
Name equity and enterprise value multiples.
A:
Equity value multiples = earnings, earnings growth, book value of equity Enteprise value mutiples = financial, non-financial - financial = revenue, EBITDA, EBIT, free cash flow, book value of total capital
Q:
How does the estimation of future cash flows work? What are difficulties?
A:
- Analysis of the past in order to extract knowledge about relevant markets and strengths and weaknesses of the company --> observe cash in- and outflows and their influence factors - difficult to do this for startups as there are only a few data from the past and there are a lot of investments at the beginning
Q:
What has to be considered regarding VC financing and investments in different years?
A:
the value of what you invested in 2009 e.g. was different to 2011 --> if company value increases a lot: up-round --> in next round, value is higher so that you need to invest more money in order to get one share
Q:
What are the requirements for a new venture valuation?
A:
1) Forward looking 2) Realistic portrayal: Flexibility, Downside risk & Upside Potential 3) User friendliness: data availability & reliability, complexity & transparency 4) acceptance
Q:
Describe the new venture valuation requirement "User friendliness".
A:
- data is a problem as there are ususally no reliable data from the past - low complexity = good applicability - transparency in order to avoid valuation and interpretation errors -> how transparent is the value one came up with?
Q:
Describe the requirement "Flexibility" for new venture valuation.
A:
leadership might react flexible regarding a changing environment --> this option needs to be considered in the valuation method
Venture Valuation

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