A method for performing a value assessment of a portfolio company during the venture stage of development using a selection matrix

Abstract

Introduction. The evaluation of the value of companies that are recipients of venture capital investments is an integral part of the funding process. Determining the correct value assessment of a portfolio company allows calculating what share of the company’s equity will be received by a venture capital fund in exchange for investments. In this article we will study the most relevant methods for the value assessment of recipient companies during the venture stages of development. The purpose of the article is to create a selection matrix for determining the method of value assessment for a portfolio company during the venture stage of development, taking into account specific national features. Methodology. We used the following research methods and approaches: classification, induction and deduction, critical and logical analysis, generalisation, and structuring. Results. We systematised and described the operating results that companies in receipt of venture capital investments achieve during the venture stage of development and we also generalised financial determiners. Financial determiners that serve as the basis for the methods of value assessment of portfolio companies were identified through the generalisation of financial and operational results. It was established that there is no perfect method for the valuation of recently founded innovative companies that offer a unique product or service and do not have a developed market yet. As a result of the conducted study, we developed a method using a selection for the value assessment of a portfolio company. As compared to other existing methods, the suggested matrix is a systematic approach that allows choosing the methods of value assessment depending on the development stage of a recipient company's investment.