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)
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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
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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
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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)
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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
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TESTE DEIN WISSEN
Name equity and enterprise value multiples.
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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
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TESTE DEIN WISSEN
How does the estimation of future cash flows work? What are difficulties?
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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?
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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
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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".
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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.
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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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