How the estimate is calculated
The method depends on the evidence you have. A priced round in the last 12 months is the strongest, so the model calibrates an option pricing model to that round (a backsolve) and reports high confidence. An older round is rolled forward and adjusted for performance since, blended with a revenue multiple where revenue is given. Without a round, a sector revenue multiple applies, adjusted for cash and debt. Without a round or revenue, the range sits between net assets and total capital invested.
Total equity value is then allocated across preferred shares, common shares and options with a Black-Scholes option pricing model, treating preferred as non-participating with a 1x preference and 1:1 conversion. Finally a discount for lack of marketability is applied to the common shares using the Finnerty and Chaffe put-option models. The low end of the range uses the larger discount and lower volatility; the high end uses the smaller discount and higher volatility.
What it does not do
- It is not a 409A valuation and gives no safe harbor protection, and it is not a valuation agreed with HMRC for EMI purposes.
- SAFEs and convertible notes are not modelled. Participating preferred, multiple liquidation preferences above 1x and non-pari-passu stacks are simplified.
- Sector volatilities and revenue multiples are practitioner assumptions reviewed quarterly, not a licensed transaction dataset.
Read more in our guides to 409A valuations and EMI valuations.