Valuation World Cup: Group A – Winners Revealed!

Here is the first Group play results!  Keep up to date on all things Valuation World Cup here!

The first group saw three teams tightly compete for the two knockout positions and one barely show up all of group play. The key to advancing out of Group A was a given method’s ability to recognize current trends in the market and its flexibility to capture those in the valuation.

Group A – 1. Adjusting the Average and 4. Recent Transactions Move On!

a table

Game 1: Cost-to-Duplicate  0-3  Adjusting the Average
Game 2: Recent Transactions  3-2  Build Up
Game 3: Adjusting the Average  2-1  Recent Transactions
Game 4: Build-Up  2-0  Cost-to-Duplicate
Game 5: Cost-to-Duplicate  0-2  Recent Transactions
Game 6: Build-Up  2-2  Adjusting the Average

Closest Match
With two of the six matches resulting in draws, this group was reasonably balanced. The match-up between Adjusting the Average and Build Up methods was certainly the most evenly matched, with both attempting to quantify intrinsic qualities of companies. It’s hard to say which method is better, since they both rely on subjective opinions of the companies to derive a hard numeric value.

Since this match-up failed to decide who would advance, it came down to their respective matches against Recent Transactions, the eventual group runner-up. Adjusting the Average matched the Recent Transactions in terms of relying on current market conditions to establish a base value. The Build Up method, despite its similar structure, had little flexibility for changes in market conditions without adjusting each block used to build a valuation.

Biggest Blow Out
Cost-to-Duplicate against Adjusting the Average
looked a little like the Swiss taking on the French: simply outmatched from the get-go. Cost-to-Duplicate’s real struggle was that it wasn’t grounded in current market expectations, but only looked to the “qualification games” and what it took to reach group play. This can result in severe undervaluation of promising early entries entering large markets – just the type of company a VC dreams about nightly!

Memorable Moment
On the last day of group play, Adjusting the Average recognized, and perfectly accounted for, a company’s ability to go to market without another round of funding. This ensured an undiluted return late in the second half as an equalizer against the Build Up method, which consequently led to Recent Transactions stealing the final advancing spot!

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5 thoughts on “Valuation World Cup: Group A – Winners Revealed!

  1. Pingback: The Valuation World Cup Begins! | Capital: Ventured.

  2. Pingback: Monday Morning Memo | Capital: Ventured.

  3. Pingback: Valuation World Cup: Quarterfinal 1 – EV/Sales Cruises to Victory! | Capital: Ventured.

  4. Pingback: Valuation World Cup: Quarterfinal 2 – Financial Powerhouse Upset! | Capital: Ventured.

  5. Pingback: Valuation World Cup: Semifinal 2 – Attach Rate advances! | Capital: Ventured.

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