The category of early-stage companies includes startup companies, which have an initial concept, design, or business plan but, not an actual product, as well as multibillion-dollar companies with significant revenue and operations that have yet to reach profitability. The valuation of an early-stage enterprise (ESE) is based on a mix of quantitative analysis, people insight, and intuition for the company’s growth prospects. In spite of their diversity, ESEs have unique characteristics as a group that warrant special consideration in valuation. Antonella Puca provides an overview of the valuation of early-stage companies and their equity securities using the Black-Scholes-Merton option pricing model (BSM OPM). We’ll provide examples of how to build and apply a BSM OPM to value preferred stock, common stock, and convertible bonds in an early-stage company based on the price of the latest preferred stock round (backsolve method). We’ll also provide examples of how to best reflect dividend and participation rights in the model and how to conduct a delta partition analysis to estimate the volatility of specific classes/series of equity interests in the company.