Valuing Venture Deal Terms with Options
For my final project in my entrepreneurial finance class this year at Tuck, I decided to look at different methods for valuing early stage companies. I ended up building a model for valuing early stage companies using the options based valuation approach. I found the model was highly useful for a) simply determining the value of a company based on deal terms likes liquidity preference and participation rather than a traditional post or pre-money analysis and b) measuring the dollar or equity cost of including different features in deals like liquidity preference and participation.
For anyone who may be interested in what their term sheet is saying, here are the model and write-up. Feel free to share!