Business Valuation 101: The Comparables Analysis Method

We learn how to value a company based on comparables analysis aka the multiples valuation method using an example. We also discuss how this method applies to early-stage vs. late-stage companies.

Communities:

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We learn about how the comparables valuation method is used to value companies in venture capital, private equity & public markets.

Normally we would say something more like "what are the company's comps", so if you hear people reference that we are talking about the multiples valuation method.

In this lesson, we talk about multiples by growth stage, public vs. private markets, liquidity considerations, and then we do an example case study to practice valuing a company using a few different comps from the public market.

Sections:
0:18 definition of the comparables analysis valuation method
1:47 context: venture capital vs. private equity strategies & growth vs value
4:57 public vs. private market multiples
6:25 comparables valuation case study for marketplace businesses

By the end of this video, you will understand how to value a business using the market multiples valuation method - I guarantee it.

If you have questions - leave a comment below and I'll try to help. Cheers!

#comprarablesanalysis #startups #marketplaces

[duncanmahood]

Interesting how much a valuation ultimately comes down to your subjective interpretation of the data, the method used, and your market thesis. More of an art than a science? Thanks again Eric!

[blessedowo]

Thank you so much for this bro. I'm studying valuations on my own and you are a goldmine of a resource. When I make it in the big corporate world, I will find a way to pay back. Thanks brother

[AliceShisori]

I'm learning so much from you bro

[chuckster]

hi when you say for companies VC invests in as they scale up to series a, b, c, can you please elaborate on what series a, b, c represents?

[saharalasmari]

Hello, thank you for making these videos. I just wanna ask, I work in a bank in the private equity desk, so we basically performes as LPs in many PE and PC funds, as an officer there can I use financial modeling to be able to choose the right fund?? If so plz suggest for me videos or courses to learn this skill since I just joined this desk!!!

[minksol]

Hi Eric, thank you for the clear explanation.

One thing I was wondering about is a more practical / applied one; these valuations are (partly) based on the expectation that revenue growth rates and CAC Ratio remain the same for the next years to come. How realistic is that expectation?

It's a thing I wonder about in general regarding assumptions in finance related scenario's; If you're basic assumptions & predictions turn out wrong, the whole valuation falls apart right? Or is there a reliable rule of thumb / law regarding these numbers that have been proven to be true again and again?

Also, In general I was wondering how this ties into the strategic approaches some big companies make. Like Spotify for example which has I believe never made a net profit but instead focuses on growth. Could you do a detailed analysis of how they plan on making that money back in the long term and specifically how they (the Spotify investors) would calculate that?

Looking forward to your response.