Valuation - International Valuation Guidelines

Guidelines developed by EVCA, BVCA and AFIC (the European, British and French Private Equity and Venture Capital Associations) towards investors internationally concerning valuation methodologies. Their aim is improved transparency, so that investors are better able to monitor and evaluate the performance of their investments and to make the asset class more accessible and comprehensible to new and existing investors. The guidelines have been endorsed by more than 20 European and Non-European associations and are consistent with IFRS and US GAAP.

Valuation Methods

The policy guidelines a management team uses to value the holdings in the fund’s portfolio. More generally, valuation is an estimate of the price of an item at a given time, based on a model and comparison with the value of similar items.

Vendor Placing

In the UK, a placing of securities in a publicly traded company that have been issued to the vendors of a company or business that is simultaneously being acquired by the issuer, where the vendors have received the securities as consideration in the acquisition and the placing enables them to receive cash for the securities.

Venture Capital

Original financing provided for new higher risk ventures such as start-up companies. Over time, the term has expanded to also include investment in management buy-outs and other situations in which venture capitalists invest. Venture capital investments are generally characterized by high risk and an expectation of high return.

Venture Capitalist or VC

An individual or entity that specializes in providing venture capital financing.

Venture Philanthropy

A field of philanthropic activity where private equity / venture capital business models are applied to the non-profit and charitable sectors.

Venture Purchase of Quoted Shares

Purchase of quoted shares with the purpose of delisting the company. See ‘Delisting’ and ‘Public to Private.’

Vesting (Stock, Options and Warrants)

The time at which a right to purchase securities becomes unconditional. Over a period of time, an employee of a company earns rights to receive benefits (e.g., stock) as a result of that employment, although until the rights are earned, the employee may not be able to claim ownership of the related benefits and those potential benefits are forfeitable. Restricted stock or options, or warrants to purchase stock that may not be sold or exercised, or that are subject to risk of forfeiture for a period of time, are ‘unvested.’ That portion of the stock that is not subject to risk of forfeiture and that may be sold, or the options and warrants that may be exercised, are referred to as ‘vested.’

Vintage Year

The year in which the venture firm began making investments. Often, those funds with Vintage Years at the top of the market will have lower than average returns because portfolio company valuations were high, e.g., an Internet Fund started in Vintage Year 1998.

Volatility

The volatility of a stock describes the extent of its variance over time between high and low market prices. High volatility denotes a wide variation and low volatility, a more stable stock. See ‘Beta.’

Voting Trust

An agreement whereby a number of shareholders transfer stock and voting rights to one or more persons, called voting trustees, for a specific time period.

Vulture Capitalist

Negative term for an investor who smells fast money and who is not serious about investing in companies with long-term potential. Compare with ‘Venture Capitalist.’