The first year TI:GER course has shifted focus from customer discovery (although those interviews are still on-going, we have one on Monday with a solar panel installation start-up in the Atlanta area) to valuation.
Valuation is being taught by guest lecturer Mark Buffington who works as a venture capitalist in Atlanta. He provides great insight into how start-ups, specifically tech start-ups, are valued in the market. Since a large majority of entrepreneurial ventures require outside capital, learning how firm value is derived is important not just to VC's but to the entrepreneurs themselves.
So far, we have learned several different valuation methods: comparable transactions, revenue multiples, and discounted cash flow. We are now moving in to monte carlo simulation modeling that will allow us to assign weights and probabilities to a variety of success levels. This is particularly important when valuing start-ups because their chance for early exit is very high. Specifically in the medical device industry, the probability of achieving FDA approval and passing clinical trials must be included in any pre-approval firm.
Learning more about how firms are valued will allow us (over the next two weeks) to create a valuation for our start-up. We're at work practicing the monte carlo simulation tools this week, then it's time to assign weights to our on probability of success. I'm looking forward to really seeing how much of an impact our choices today will affect future value.