Valuation of early-stage, high-tech firms

BVWire recently asked for some observations on significant developments in BV over 2014 and what 2015 has in store. Members of the editorial advisory board of BVR’s Business Valuation Update responded. Here's a sample of their comments.

Neil J. Beaton (Alvarez & Marsal Valuation Services) offers thoughts from his perspective, which is performing valuations for early-stage, high-tech companies, “The two big developments shaping valuations for these firms were new platforms for funding companies and a significant increase in the ability of founders and early employees to sell their shares before the company has a liquidity event,” he says. He’s referring to the crowdfunding platforms that emerged through the Jumpstart Our Business Startups (JOBS) Act. He’s also talking about new mechanisms for the sale of ownership interests created by some innovative law firms.

As for his outlook for 2015, he observes: “More of the same! IPOs are on the rise, oil prices are dropping, and we have a new Congress and Senate.” He continues: “China is taking off as a start-up mecca and the newly minted Alibaba billionaires can be expected to plow that new-found wealth back into new companies like we see in Silicon Valley all the time. The Indian start-up scene is also heating up as the tech economy has matured significantly into a business base of its own versus the ‘offshore, cheap labor source’ India was known for in previous years. I expect to see a lot more IPOs in India, which, of course, will spill over into the U.S. markets as competition for dollars heats up. I’m already seeing increases in average pre-money valuations (see PitchBook’s 2014 VC Overview), and that trend can be expected to continue through 2015 if the economy stays on track.”

For more comments, see the Jan. 14, 2015, issue of BVWire, a free weekly ezine.