Acknowledgments.
About the Author.
Preface.
Chapter 1 Laying the Foundation.
A Unique Landscape.
An Overview of the Venture Capital Industry.
Conclusion.
Chapter 2 Understanding Early Stage Preferred Stock Rights.
Stock Rights.
Contractual Rights.
Conclusion.
Chapter 3 Enterprise Valuation Approaches.
Relevancy of Traditional Valuation Approaches.
Cost Approach.
Market Approach.
Income Approach.
“Vectoring” Valuation Approach.
The Income Approach as an Oxymoron.
Conclusion.
Chapter 4 Application of the Option-Pricing Method in Allocating Enterprise Value.
Important Assumptions Underlying the Option-Pricing Model.
Option-Pricing Method Steps in Application.
Other Considerations in the Option-Pricing Method.
Pros and Cons of the Option-Pricing Model.
Conclusion.
Chapter 5 Application of the Probability-Weighted Expected Returns Method in Allocating Enterprise Value.
Illustration of the PWERM.
PWERM Critical Assumptions.
Overview of Stock Rights.
Identification of Outcomes.
Updating PWERM Analyses.
Conclusion.
Chapter 6 Applicable Discounts for Early Stage Companies.
Basis of Discounts.
Suggested “Corrections” to the Current Use of Put Models for Quantifying DLOMs.
Dilution Discount.
The Likelihood of Liquidity.
Conclusion.
Chapter 7 Advanced Valuation Topics for Early Stage Companies.
Utilizing the OPM as a “Valuation” Methodology.
Sequential and Compound Options.
Allocating the Residual Value.
Further Extensions for Compound Options.
Venture Capital Rates of Return.
Executive Stock Compensation.
Conclusion.
Appendix A Allocation of Enterprise Value Using the Option-Pricing Method: Treatment of Derivatives on Common Stock.
Appendix B: Volatility in the Option-Pricing Model.
Notes.
Index.
