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Lorenzo Carver, MS, MBA, CVA, CPA, is CEO of Liquid Scenarios, a technology-based financial business intelligence solution company that provides services to investors, practitioners, entrepreneurs, and academics on how to measure and realize high-growth venture value. Carver has a twenty-year track record of helping thousands of clients understand how to measure and realize high-growth venture value. He is the author and developer of BallPark Business Valuation, the #1 selling, award-winning small-business valuation solution software covered by Bloomberg Businessweek, Entrepreneur, CPA Software News, The Kim Komando Show, and business journals worldwide.
Acknowledgments | p. ix |
Introduction What You Don't Know About Valuation Will Cost You Money | p. 1 |
Using Facebook, Twitter, and Linkedln to Explain VC Valuation Gains and Losses: How VCs, Angels, Founders, and Employees Give Up Investment Gash How Every Day | p. 13 |
Did Valuation Ignorance Cost ConnectU (and the Winklevosses) $50MM? | p. 14 |
An Expert Doesn't Need a 409A Valuation When He or She Has a Certificate and Basic Math | p. 15 |
Valuing Facebook's Common Stock Compared to Preferred Stock in Minutes | p. 16 |
What the Winklevosses Would Have Seen in Any 409A Valuation Report | p. 19 |
Deriving a Discount for Lack of Marketability for Valuations | p. 27 |
Facebook at $80 Billion Valuation versus Enron at $80 Billion Valuation | p. 35 |
Deal Terms, Waterfalls, and the Pre-Money Myth | p. 36 |
The Pre-Money Myth | p. 44 |
Summary | p. 56 |
Should Venture-Backed Companies Even Consider a DCF Model?: Introducing the life Science Valuation Case: Zogenix | p. 57 |
Zogenix: Company Background Summary and Highlights | p. 58 |
Leaping Forward Just 20 Months, the Company Files for an IPO | p. 64 |
Order of Valuations Presented in This Case | p. 67 |
Valuation Methods versus Allocation Methods Regarding Zogenix | p. 69 |
Separating Enterprise Value from the Allocation of That Value | p. 69 |
Valuing Total Equity | p. 72 |
Using Future Value (FV) and Present Value (PV) to Value Future Cash Flows Today | p. 79 |
Summary | p. 82 |
Applying the Typical DCF Model to a Venture-Backed Company Hardly Ever Works | p. 85 |
The Gordon Growth Model | p. 85 |
High Growth Limits the Gordon Growth Model | p. 87 |
Dividend Irrelevance and Capital Structure Irrelevance | p. 90 |
Using Comparables (Generally Market Multiples) to Generate a Terminal Value | p. 91 |
Actual Differences between Angels and VCs versus Perceived Differences | p. 100 |
Applying Valuation Methods and Allocation Methods at Inception | p. 102 |
Summary | p. 104 |
"Enterprise Value" + "Allocation Methods" = Value Destruction: Undervaluing Companies and Overvaluing Employee Options | p. 107 |
Most 409A Valuations Undervalue the Company and Simultaneously Overvalue Employee Stock Options | p. 107 |
Did Auditors Drive Valuators to Overvalue Employee Stock Options? | p. 109 |
Most 409A Enterprise Value Calculations Ignore the "Takeover" Value of Preferred | p. 113 |
The Realistic Range of Possibilities Depends on Who the Investors Are | p. 119 |
Overstating Returns and Understating Returns on the Same Asset (Simultaneously) | p. 125 |
"What Happens to Fund IRRs When You Assume Book Value Equals Market Value? | p. 128 |
The Real Cost of Fair Value, Fair Market Value, and Enterprise Value | p. 132 |
Yahoo! Case | p. 137 |
Why You Should D.O.W.T. (Doubt) Venture Capital ReturnsùOption Pool Reserve | p. 159 |
Unissued Option Pools | p. 159 |
Value Conclusion Elements Impacted by Option Pool Reserve Assumptions | p. 161 |
Impact on Parties Relying on Assumptions of VC Investments | p. 176 |
If Valuation Can't Make You Money, Do You Really Need It?: Learning Practical Applications from Kayak.com | p. 183 |
Applying Studies to Real-World Cases | p. 186 |
Important Questions to Ask | p. 213 |
Summary | p. 223 |
Don't Hate the Appraiser (Blame the Auditor Instead) | p. 225 |
Interview with Jeff Faust, AVA | p. 226 |
Summary | p. 236 |
Don't Blame the Auditors (Blame the Practice Aid Instead): 409A Valuation Professionals Discussing Topic 820 (FAS 157) WithVCCFOs | p. 287 |
Introduction to the Expert Panelists | p. 238 |
The Auditor's Valuation "Bible" | p. 239 |
SAS101 Tests, PWERMS, and OPMs | p. 240 |
Pwerms and rNPV/eNPV Models | p. 243 |
Subjectivity and the PWERM (or "Power") Method | p. 243 |
Finding Inputs for the OPM Model | p. 245 |
Enterprise Values versus Allocations | p. 246 |
Next Round Pricing and Topic 820 | p. 248 |
Different Ways of Treating Granted, Unvested, and Reserved Options | p. 250 |
Valuing Warrants in Venture-Backed Companies | p. 252 |
Quantifying Qualitative Inputs to Value Conclusions for VC-Funded Companies | p. 253 |
Discounts for Lack of Marketability (DLOM) and Venture-Fund Portfolios | p. 254 |
Sharespost, Second Market as Market Inputs | p. 258 |
Summary | p. 262 |
Chapter 10Mow That You Understand Venture Capital Valuation, Share It | p. 263 |
About the Author | p. 269 |
Index | p. 271 |
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