On November 29th, 2021 you’ll be upgraded to the latest version of Equidam with updated valuation parameters. This may result, on average, in a slight valuation increase.

What’s changing

1 | Average valuations used in the Scorecard Method and maximum valuations used in the Checklist Method

We base our estimates on real transactions by country since November 1st, 2017. Whenever we were not able to find a significant amount of real pre-money valuations in a given country, we broadened our perspective to the closest larger geographic entity (namely, continental region and continent). You can refer to the table at this link to see how they will change for your country specifically.

2 | Industry EBITDA multiples used in the VC and DCF with multiple

Our multiples are based on public market conditions at the beginning of current year. Data is gathered at a global level, and aggregated by industry. You can refer to the table at this link to see how they will change for your industry specifically.

3 | Discount rate components used in the two DCF methods

Most of the parameters determining the discount rate have been updated to reflect the most recent market situation in terms of systemic and industry-specific risk. You will be able to see these parameters in your valuation reports.

General comments on the effect of the changes

A year ago, we were wondering what type of reality we had entered. The COVID pandemic has restricted venture capital investment. The biggest concern seemed to be what type of market crash this would create. Would there be a long, arduous “nuclear winter” like the one we had from 2001 to 2003? Or would it be a repeat of 2009’s “V-shaped recovery”? 

Perhaps unsurprisingly, the answer is neither.

As a result, the next question we need to examine is: Why did 2020 bring us the worst economic collapse since the Great Depression, yet the fastest venture market rebound ever?

One reason is the increased importance of technology to the economy in general, and the “post-pandemic” economy in particular. For decades, the technology sector’s part of global GDP has been gradually increasing, as has its share of world market capitalization. Even outside of the tech industry, technology is driving an ever-increasing share of competitive advantage, which is why so many businesses are rushing to innovate their business models. Following the Great Recession of 2009, technology opened the way for recovery. In 2020, it presented an alternate reality, in which the recession never occurred and demand grew as firms and consumers found viable methods to work in the COVID era.

Another important aspect is the lack of options for capital seeking a return. Investors have no option but to invest in stocks, with interest rates at record lows and central banks injecting liquidity into the markets. Thus, equity investors turned to private markets.  As a result, it should come as no surprise that startups and cryptocurrencies would perform well in a capital market like this one.

Please don’t hesitate to let us know in case you have any questions. Thanks for using Equidam!

The Equidam Team