Portfolio valuation is an interesting piece of art in the VC circles. Some of the funds are public and they have to disclose their positions openly. Most of the funds are private and are more than secretive about their returns and valuations. Writing down your valuation of a target company gives a certain signal to your investors but your collegues can read between the lines as well if your valuation level is way above the realistic level. At least it should signal something about your relative position vis-a-vis your investors or about your overall performance. Or maybe you're just a gambler and waiting for the lady luck. My opinion is that window dressing will get you only so far. Eventually the truth will come about and usually time will not make up the errors. Just look up the Shell reserve problem which was already known in 1998 and finally resulted the company CEO to resign earlier this year.
EVCA offers a free valuation guide (pdf) for those interested in the topic.
Posted at August 25, 2004 09:09 AM | TrackBack