Musings on Markets · 2016-10-02
· 3532d
Venture Capital Pricing vs. Valuation: Why VCs Play the Pricing Game
The author argues that venture capitalists price companies based on market comparables rather than fundamental valuations. This distinction is critical to understanding VC performance metrics and the difference between elite and average venture capital firms. The article examines four pricing methodologies used by VCs and critiques the WSJ's analysis of Andreessen Horowitz's returns.
Metrics in this report
Andreessen Horowitz Fund IRR
25-42%
range across three funds
Venture capital fund annual returns
Liquidity Discount for Private Companies
20-30+%
estimated range
Adjustment applied to public company multiples for private valuations
Uber Valuation (Saudi Sovereign Fund Round)
62.5$B
June 2016 pricing
Late-stage VC pricing reference point