Other Value Worlds

This chapter describes six worlds and discusses the processes that are used to derive value in each: investment value, owner value, collateral value, early equity value, bankruptcy value and public value world. The world of investment value describes the value of a business interest to a particular investor with a given defined set of individual investment criteria. The criteria usually are stated as a compounded return expectation. The world of owner value measures the value of a business or business interest to the current owner. This world assumes the owner's current use of the interest and his/her ability to exploit the asset continue in the future unabated. The collateral value world measures the amount a creditor is willing to lend with the subject's assets serving as security for the loan. The early equity value world describes the valuation process for early round investors. The early equity world is the domain of venture capitalists (VCs) and angel investors but also applies to any investor who gets in on the ground floor of a business opportunity. Bankruptcy value world states that when a business is unable to service its debt or pay its creditors, the business or its creditors can file with a federal bankruptcy court for protection. Public companies, especially those with floats of more than $500 million, comprise the public value world. Public investment bankers are the valuation authorities in this world.