Episode Details

Session Description: In this session, I look at why the absence of historical data, the lack of a working business model and the uncertainty about survival and success make valuation more challenging at young firms and start-ups, and why the payoff to making your best estimates, in the face of these challenges, is so large. I then examine the process of valuing and pricing a young firm or start-up, and techniques that can be used to face up to the uncertainty in your estimates.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/CLC/slides/Ch10.pdf
Exercise:
For the youngest company in your peer group:
a.     Given what you have learned about your company, what is your valuation story?
b.     Does your valuation story pass the 3P test?
c.     How does your valuation story play out in your valuation inputs (revenue growth, margins, reinvestment, and risk)?
d.     Given these valuation inputs, what is your valuation for the company?
e.     How uncertain are you about this valuation? How do you deal with this uncertainty?
f.      Is there any optionality in this company? If yes, why and what drives that option’s value?

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