Formula for determining VC valuation part gut feeling, part market conditions

A common problem our venture stage clients face is how to value their company. This is actually a problem both the entrepreneur and the venture capitalist struggle with. It just isn’t clear to either party how to place a substantiated valuation on a relatively early-stage business without a meaningful history of financial performance.

For these reasons, the tools that sponsors of private equity firms use to value a business – discounted cash-flow analysis, purchase price multiples, internal rates of return – are not useful to the venture capitalist.

Valuing a venture-stage business

So with all this uncertainty, how do venture capital…