Venture Valuation

Venture valuation is defined as the act of determining the economic worth of a business, including current or future projected value. Valuation is generally performed in order to assign a price to equity in the company. There are different valuation methods, each of which can result in varying values; hence selection of the appropriate method should be based on where the firm derives its value and the level of uncertainty in the venture. The major valuation methods are discounted cash flow, risk-adjusted net present value, asset-based, market/comparables-based, Chicago venture method, option-based, and venture capital valuation.

In general, there are three main reasons for valuing a venture: raising capital or selling equity, selling the business, and tracking the progress of the venture. The valuation method greatly affects ...