By Ilya Strebulaev and Manuel Vasconcelos (July 1, 2022, 4:09 p.m. EDT) — Valuing private companies can be challenging, especially when those companies are growing rapidly and involving new technologies and new markets.
Unlike publicly traded companies, there are no readily available market prices, and the use of commonly accepted methodologies such as discounted cash flow or multiple valuation can be difficult due to the lack financial information and/or appropriate comparables.
Instead, market participants often rely on what is known as post-monetary valuation, which is calculated by taking the price per share paid in a given external funding round and multiplying it by the total number of shares outstanding, on a fully diluted basis, of …
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