Silicon Valley Business School

Contents of SVBS Course: Valuation

This course explains the valuation techniques commonly used in Silicon Valley and the technology sector. Discounted cash flow and income-based techniques are discussed, together with cost based and comparable approaches. The following topics are covered: the market forces of supply and demand, revenue multiples, earning multiples, liquidity discount, return on investment, pre-and post- investment valuations. These techniques are applied to the appraisal of patents, software, trademarks and the valuation of startups in the seed, early, expansion and mezzanine stages of development.

Learning Objectives and Outcomes

Upon completion of this course you will be able to:

Apply various valuation techniques to the valuation of startups, established businesses and patent assets.
Distinguish between the income, cost and comparables approaches to valuation.
Place a valuation on an early-stage startup venture--before the business has significant sales revenues or profits.
Place a value on intangible assets including patents, trademarks, copyrights and software.


Course Sections

The course is organized into the following sections:

Valuation: The Concept of Value
Valuation: Comparables Approaches to Valuation
Valuation: Cost Approaches to Valuation
Valuation: Income Approaches to Valuation
Valuation: Economic Forces of Supply & Demand
Valuation: Valuation of Established Businesses
Valuation: Share Price & Company Valuation by Wall Street & Public Market Investors
Valuation: Businesses in Merger & Acquisition Transactions
Valuation: Startup Businesses in Venture Capital & Other Financings
Valuation: Product Lines
Valuation: Software Code
Valuation: Patents
Valuation: Trademarks
Valuation: Domain Names
Valuation: Businesses with Patents & IP Assets
Valuation: Unused Quiz Question(s)

Valuation: The Concept of Value
  • Video ~ What is Value? Purpose of Valuation
  • Book ~ Dollar Value
  • The book, Dollar Value, written by David Smith, describes the techniques used to assess real-world valuations of technology-oriented assets and explains how the prices offered by buyers looking to acquire the ideas and productions of inventors, creators, developers and entrepreneurs can be predicted with some accuracy.

  • Slideshow Handout ~ Company Valuation
  • Reading ~ Book: Dollar Value ~ The Concept of Value
  • Valuation: Comparables Approaches to Valuation
  • Video ~ Valuation ~ Comparables
  • Video ~ Real Estate Appraisal
  • Reading ~ Book: Dollar Value ~ Comparables Approaches
  • Valuation: Cost Approaches to Valuation
  • Video ~ Valuation ~ Build Cost Plus
  • Video ~ Cost Approach to Valuation in Insurance
  • One of the basic decisions you need to make when purchasing an insurance policy is the type of valuation you would like it to be based on. This will affect the amount of coverage you wish to purchase, policy premiums, coinsurance and much more. Insurance policies need to have a fair means of valuing your property at the time of a loss. The two basic choices are: “Replacement Cost Valuation” and “Actual Cash Value”.

  • Reading ~ Dollar Value ~ Pages 11-13
  • This portion of the book, Dollar Value, by David Smith, explains the following Cost-based approaches to Valuation: Replication Cost Approach; Replacement Cost Approach; as well as Cost Savings Approach.

    Valuation: Income Approaches to Valuation
  • Video ~ Valuation ~ Earnings Multiple
  • Video ~ Valuation ~ Revenue Multiple
  • The value of a company can be estimated by comparing its sales revenue with the revenues of similar companies with known valuations.

  • Video ~ Valuation ~ Discounted Cash Flows
  • Video ~ Valuation ~ Bonds
  • Video ~ The Time Value of Money
  • Video ~ What is the Time Value of Money?
  • Video ~ Discounted Cash Flow
  • Reading ~ Dollar Value ~ Pages 13-17
  • Reading ~ Introduction to the Time Value of Money
  • The time value of money is the value of money, figuring in a given amount of interest earned over a given amount of time. For example, $100 of today's money invested for one year and earning 5% interest will be worth $105 after one year. Therefore, $100 paid now or $105 paid exactly one year from now both have the same value to the recipient who assumes 5% interest; using time value of money terminology, $100 invested for one year at 5% interest has a future value of $105.

    Valuation: Economic Forces of Supply & Demand
  • Video ~ Economic Forces of Supply & Demand
  • Video ~ Price Driven by Supply and Demand
  • Reading ~ Book: Dollar Value ~ Market Forces of Supply & Demand
  • In a free market, the rules of economics govern the price of companies, shares and technology assets as well the price of apples, oranges, jet planes and everything else. A principle you should consider when considering price says that the price will tend to rise when you introduce additional competing buyers; and conversely, the price will tend to fall when additional competing sellers are introduced to the marketplace.

    Valuation: Valuation of Established Businesses
  • Video ~ Valuation ~ Stock Options
  • Stock Options are rights to buy shares in the future at a pre-agreed price. This voice narrated slideshow investigates how Stock Options might be valued.

  • Video ~ Price-Earnings Ratio
  • Reading ~ Book: Dollar Value ~ Valuation of Established Businesses
  • Valuation: Share Price & Company Valuation by Wall Street & Public Market Investors
  • Video ~ Valuation ~ Publicly Traded Companies
  • Video ~ Valuation ~ IPO
  • Video ~ Valuation ~ Liquidity Discount
  • Video ~ Valuation ~ Minority Discount & Control Premium
  • Video ~ Behavioral Finance: The Role of Psychology
  • Video ~ History and Theory Behind Stock Markets
  • Video ~ Efficient Markets Theory
  • Silicon Valley Trends Podcast ~ What Drives Stock Market Share Prices?
  • If you ever wondered how share prices were determined on the stock market, this podcast might be for you. In this podcast David Smith episodes explains how the price of a stock is driven by the value of the company, which is driven by the company’s earnings. David goes on to explain how dividends, the balance sheet, economic forces of supply and demand, future expectations and predictions, information about the public and its prospects, market momentum, merger & acquisition activity and market volatility each drive the share price.

  • Reading ~ Dollar Value ~ Pages 27-30
  • Valuation: Businesses in Merger & Acquisition Transactions
  • Video ~ Valuation ~ Mergers & Acquisitions
  • This voice narrated slideshow deals with valuation for merger and acquisition transactions, particularly acquisition of companies that are generating positive cash flows.

  • Video ~ Valuation ~ When to Talk Price
  • Video ~ Valuation ~ Weighted Average
  • There are various techniques available for valuing a company. Some can produce inaccurate valuations in certain situations. Reviewing several valuations produced by various methods and calculating a weighted average may produce a figure that eliminates some of the extreme value assessments.

  • Video ~ The Art of Valuing a Business in M&A
  • Reading ~ Book: Dollar Value ~ Valuation of Businesses in Mergers & Acquisition Transactions
  • Valuations are instrumental when companies are acquired in merger or acquisition transactions. The price paid to acquire a company sets an accurate valuation for that particular company at that point in time, especially when the acquisition is all financed in cash. When the acquisition is financed in stock, and shares in the acquirer is exchanged for stock in the acquired company, another step in the valuation process is necessary to determine the fair market price of the stock exchanged, and the valuation figures produced can be somewhat more subjective than a pure cash transaction.

  • Reading ~ Startup Valuation Case Study
  • The Delaware court analyzes the various valuation techniques featured in the sale of Trados. This is a real-world example explaining how valuations are considered in M&A transactions, and how they are treated by the Delaware courts.

    Valuation: Startup Businesses in Venture Capital & Other Financings
  • Video ~ Valuation ~ Return on Investment
  • Video ~ Startup Valuation
  • This voice narrated slideshow looks at the methods of valuation used by Venture Capital and other investors, when assessing the value of seed and early stage startup companies.

  • Video ~ Valuation ~ Early & Seed Stage Startups
  • Video ~ Valuation ~ Later-Stage Funding
  • Video ~ Valuation ~ Depends on Transaction
  • This voice narrated slideshow looks at the valuation techniques that are useful for assessing the value of companies, under various scenarios.

  • Video ~ Pre-Money Post-Money
  • Video ~ Liquidation Preference
  • Silicon Valley Trends Podcast ~ Why Startup Valuation is Not Startup Valuation
  • This episodes explains how startups are valued and presents the argument as to why venture capital investments in startup ventures should not be used as the basis to place a valuation on the company.

  • Video ~ What is a 409A Valuation?
  • How a third party valuation of common stock can avoid costly tax consequences later on.

  • Video ~ Inrtroduction to 409A Valuations of Common Stock
  • 409A Valuation determines the fair market value of a private company’s common stock and the price of stock option grants to employees. It’s the first step in building an equity plan that can be the cornerstone of a talented and motivated staff.

  • Reading ~ Book: Dollar Value ~ Valuation of Startup Companies in Venture Capital & Other Financings
  • Reading ~ Blip in Unicorn Valuations
  • Tech startups, especially privately held companies, reaching billion dollar valuations are referred to as "Unicorns". This article looks at the fluctuations in their valuations.

  • Reading ~ 16 Things To Know About The 409A Valuation
  • For a privately-held company, the 409A valuation is the only method you can use to grant options on a tax-free basis to your employees.

    Valuation: Product Lines
  • Video ~ Valuation ~ Technology Asset Sale
  • Reading ~ Book: Dollar Value ~ Valuation of Product-Lines
  • Valuation: Software Code
  • Reading ~ Book: Dollar Value ~ Valuation of Software Code
  • Where software code has ongoing license revenues, the value of the code can be valued by running a discounted cashflow analysis of the projected revenues to produce a net present value of the code today. However, most software does not have such ongoing royalty streams and the valuation of software code usually requires an analysis of the cost of replicating the code, with comparables where they’re available.

    Valuation: Patents
  • Video ~ Patent Valuation
  • This voice narrated slideshow looks at techniques for assessing the market value of a patent under various scenarios.

  • Video ~ The License Back: Sell Patents, then Sell the Company?
  • Video ~ Infringed Patents Sell
  • Reading ~ Book: Dollar Value ~ Valuation of Patents
  • Patents form the primary assets for many companies today, especially those in technology-oriented sectors, but the valuation of patents requires an understanding of the nature of patents and a variety of valuation methodologies. Patent valuation is necessary to assess the damages a court should award in patent litigation suits, to fix a price when a patent is sold, and to assess the value of the intellectual property sitting on a company’s books.

  • Slideshow Handout ~ Patent Valuation
  • PDF slides for the learning material titled: "Video ~ Patent Valuation".

  • No “Apportionment” Requirement for Design Patent Damages - Apple v. Samsung
  • Reading ~ Patent Sale Data
  • Defensive aggregator, Allied Security Trust has released data on its Industry Patent Purchase (IP3) patent-buying program.

    Valuation: Trademarks
  • Reading ~ Book: Dollar Value ~ Valuation of Trademarks
  • Valuation: Domain Names
  • Reading ~ Book: Dollar Value ~ Valuation of Internet Domain Names
  • Valuation: Businesses with Patents & IP Assets
  • Reading ~ Dollar Value ~ Pages 87-89
  • Certificate Course
    This certificate tracks your progress and tests you in each section. Once you have passed all the quizzes, submitted an assignment and reviewed all the materials, you will be awarded a certificate of completion.