Why is valuation harder?
Unlisted companies lack a market price updated in real-time. Valuation is instead based on models, comparisons, and negotiations.
Common methods
- Latest funding round — The price set at the company's most recent capital raise.
- Multiple-based valuation — Comparing key ratios (P/E, EV/Revenue) with similar public companies.
- DCF (discounted cash flow) — Calculating the present value of future cash flows.
- Net asset value — Based on the company's assets minus liabilities.
What affects valuation?
- Company growth rate and revenue
- Market size and competition
- Team experience and track record
- Comparable transactions
Summary
Valuing unlisted companies is more art than science. Combine multiple methods and be critical of optimistic assumptions.