{"id":6549,"date":"2020-05-18T00:00:00","date_gmt":"2020-05-18T00:00:00","guid":{"rendered":"http:\/\/www-staging.carta.com\/sg\/carta\/calibration-for-valuations\/"},"modified":"2021-03-05T06:55:31","modified_gmt":"2021-03-05T06:55:31","slug":"calibration-for-valuations","status":"publish","type":"post","link":"https:\/\/www-staging.carta.com\/sg\/blog\/calibration-for-valuations\/","title":{"rendered":"Free calibration tool for valuations"},"content":{"rendered":"<p><img class=\"wp-image-24955 aligncenter\" src=\"https:\/\/www-staging.carta.com\/sg\/wp-content\/uploads\/sites\/9\/2020\/05\/pass_3-4.gif\" alt=\"\" title=\"\"><\/p>\r\n<p>&nbsp;<\/p>\r\n\r\n<p>Over the past few months, public markets have been more volatile than any time in recent memory.<sup><a href=\"https:\/\/www.aicpa.org\/interestareas\/forensicandvaluation\/resources\/businessvaluation\/coronavirus-covid-19-fair-value-of-investments.html\" target=\"_blank\" rel=\"noreferrer noopener\">1<\/a>,<a href=\"https:\/\/www.wsj.com\/articles\/why-are-markets-so-volatile-its-not-just-the-coronavirus-11584393165\" target=\"_blank\" rel=\"noreferrer noopener\">2<\/a><\/sup> In light of market volatility, historical transactions may no longer be valid indicators of a company\u2019s current value. That\u2019s why Carta created a free calibration tool to estimate the changes in your portfolio companies\u2019 values quickly and in bulk.<\/p>\r\n\r\n\r\n\r\n<p>Calculating calibrations in a spreadsheet can be time consuming and prone to human error. Carta&#8217;s new calibration tool takes care of the calculations for you, so you can estimate valuation changes in a few clicks. All VC firms that have accepted securities on Carta have access. <a href=\"https:\/\/bit.ly\/3fMt22e\" target=\"_blank\" rel=\"noreferrer noopener\">Login to try it.<\/a><\/p>\r\n\r\n\r\n\r\n<p>Calibration can help you:\u00a0<\/p>\r\n\r\n\r\n\r\n<ul>\r\n<li>Estimate the changes in portfolio company valuations in bulk<\/li>\r\n<li>Identify which portfolio companies need an in-depth <a href=\"https:\/\/www-staging.carta.com\/sg\/asc-820\/\" target=\"_blank\" rel=\"noreferrer noopener\">ASC 820 valuation<\/a><\/li>\r\n<li>Give your LPs a heads up based on estimated changes<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<h2>How calibration works<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-image\">\r\n<figure class=\"aligncenter size-large\"><img class=\"wp-image-25041\" src=\"https:\/\/www-staging.carta.com\/sg\/wp-content\/uploads\/sites\/9\/2020\/05\/Group-501-2-1024x628.png\" alt=\"\" title=\"\"><\/figure>\r\n<\/div>\r\n\r\n\r\n\r\n<p>First, select the portfolio companies whose values you&#8217;d like to estimate in bulk. With the free tool, you can estimate the value of up to twenty companies at a time. While most companies\u2019 valuations may trend in one direction, the calibration tool takes each company\u2019s individual performance and industry under consideration when estimating value.<\/p>\r\n\r\n\r\n\r\n<p>In the private markets, company values are ideally determined by a recent, arms\u2019 length,\u00a0 negotiated transaction. If such a transaction isn\u2019t available, it\u2019s possible to calculate the private company\u2019s value by comparing it to those of similar publicly traded companies. This means that when the value of public companies change, the implied value of comparable private companies may also change.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>Let\u2019s take a look at a fictional company called Meetly to explain how calibration works. Let\u2019s say that Meetly is a private company that raised a new round of financing at a $200M post-money valuation on September 30th, 2019.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>On that date, Meetly\u2019s last twelve months (LTM) of revenue was $22.5M. That gave Meetly an implied revenue multiple of 8.89x in September. This placed its value near the 50th percentile compared to public companies in its industry.<\/p>\r\n\r\n\r\n<div id=\"footable_parent_6962\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                    <h3 class=\"table_title footable_title\">Meetly\u2019s last round closed on September 30th, 2019<\/h3>\n                        <table data-ninja_table_instance=\"ninja_table_instance_0\" data-footable_id=\"6962\" data-filter-delay=\"1000\" aria-label=\"Meetly\u2019s last round closed on September 30th, 2019\"            id=\"footable_6962\"\n           data-unique_identifier=\"ninja_table_unique_id_82943703_6962\"\n           class=\" foo-table ninja_footable foo_table_6962 ninja_table_unique_id_82943703_6962 ui table  nt_type_legacy_table selectable celled vertical_centered  footable-paging-right ninjatable_hide_header_row ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_meetlyslastroundclosedonseptember3th219 \">Meetly\u2019s last round closed on September 30th, 2019<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_operation \">Operation<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_number \">Number<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"203\" class=\"ninja_table_row_0 nt_row_id_203\">\n            <td><span>Post money valuation\u00a0<\/span><\/td><td><\/td><td><span>$200,000,000<\/span><\/td>        <\/tr>\n            <tr data-row_id=\"204\" class=\"ninja_table_row_1 nt_row_id_204\">\n            <td><span>LTM revenue on September 30th, 2019<\/span><\/td><td><span>\u00f7<\/span><\/td><td><span>$22,500,000<\/span><\/td>        <\/tr>\n            <tr data-row_id=\"205\" class=\"ninja_table_row_2 nt_row_id_205\">\n            <td><strong>Implied revenue multiple<\/strong><\/td><td><strong>=<\/strong><\/td><td><strong>8.89x<\/strong><\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6962'>\n                        #footable_6962  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n<p>&nbsp;<\/p>\r\n\r\n\r\n\r\n<p>Calibration helps you quickly estimate Meetly\u2019s new implied valuation, given today\u2019s market conditions.<\/p>\r\n\r\n\r\n\r\n<p>To do that, you\u2019ll need to consider its LTM revenue today along with how Meetly has performed relative to its plan. In this example, let\u2019s say Meetly largely met its quarterly plan, coming in at 98% of expected revenue for Q1 2020. With that performance in mind, the same cohort of investors would likely still value Meetly at the median of the public companies in its industry.<\/p>\r\n\r\n\r\n\r\n<p>Even though Meetly met expectations, multiples in Meetly\u2019s industry declined between the close of its financing and our calibration date, May 19, 2020. While Meetly\u2019s revenue multiple is still at the 50th percentile of its public company comparables, that median multiple is now 8.71x, down from 8.89x in September. Applying the median multiple to Meetly\u2019s LTM revenue as of May 19, 2020 results in a calibrated value of $191.6M.\u00a0<\/p>\r\n\r\n\r\n<div id=\"footable_parent_6963\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                    <h3 class=\"table_title footable_title\">Meetly\u2019s estimated valuation on May 19th, 2020<\/h3>\n                        <table data-ninja_table_instance=\"ninja_table_instance_1\" data-footable_id=\"6963\" data-filter-delay=\"1000\" aria-label=\"Meetly\u2019s estimated valuation on May 19th, 2020\"            id=\"footable_6963\"\n           data-unique_identifier=\"ninja_table_unique_id_1979214110_6963\"\n           class=\" foo-table ninja_footable foo_table_6963 ninja_table_unique_id_1979214110_6963 ui table  nt_type_legacy_table selectable celled vertical_centered  footable-paging-right ninjatable_hide_header_row ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_meetlysestimatedvaluationonmay19th22 \">Meetly\u2019s estimated valuation on May 19th, 2020<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_operation \">Operation<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_number \">Number<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"206\" class=\"ninja_table_row_0 nt_row_id_206\">\n            <td>LTM revenue May 19th, 2020<\/td><td><\/td><td>$22,000,000<\/td>        <\/tr>\n            <tr data-row_id=\"207\" class=\"ninja_table_row_1 nt_row_id_207\">\n            <td>Calibrated multiple<\/td><td>x<\/td><td>8.71x<\/td>        <\/tr>\n            <tr data-row_id=\"208\" class=\"ninja_table_row_2 nt_row_id_208\">\n            <td><strong>Current estimated value<\/strong><\/td><td><strong>=<\/strong><\/td><td><strong>$191,620,000<\/strong><\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6962'>\n                        #footable_6962  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6963'>\n                        #footable_6963  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n<p>&nbsp;<\/p>\r\n\r\n\r\n\r\n<p>Comparing the result to the initial post-money valuation of $200M, the calibration model suggests that Meetly\u2019s value has decreased by $8.4M since September.<\/p>\r\n\r\n\r\n<div id=\"footable_parent_6964\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                    <h3 class=\"table_title footable_title\">Meetly\u2019s estimated asset impairment<\/h3>\n                        <table data-ninja_table_instance=\"ninja_table_instance_2\" data-footable_id=\"6964\" data-filter-delay=\"1000\" aria-label=\"Meetly\u2019s estimated asset impairment\"            id=\"footable_6964\"\n           data-unique_identifier=\"ninja_table_unique_id_1329560769_6964\"\n           class=\" foo-table ninja_footable foo_table_6964 ninja_table_unique_id_1329560769_6964 ui table  nt_type_legacy_table selectable celled vertical_centered  footable-paging-right ninjatable_hide_header_row ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_meetlysestimatedassetimpairment \">Meetly\u2019s estimated asset impairment <\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_operation \">Operation<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_number \">Number<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"209\" class=\"ninja_table_row_0 nt_row_id_209\">\n            <td><span>Post money valuation on September 30th, 2019<\/span><\/td><td><\/td><td>$200,000,000<\/td>        <\/tr>\n            <tr data-row_id=\"210\" class=\"ninja_table_row_1 nt_row_id_210\">\n            <td><span>Estimated value on May 19th, 2020<\/span><\/td><td><span>\u2013<\/span><\/td><td><span>$191,620,000<\/span><\/td>        <\/tr>\n            <tr data-row_id=\"211\" class=\"ninja_table_row_2 nt_row_id_211\">\n            <td><strong>Estimated asset impairment<\/strong><\/td><td><strong>=<\/strong><\/td><td><strong><span class=\"has-inline-color has-red-color\">($8,380,000)<\/span><\/strong><\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n                    <style type=\"text\/css\" id='ninja_table_custom_css_6962'>\n                        #footable_6962  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6963'>\n                        #footable_6963  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                                <style type=\"text\/css\" id='ninja_table_custom_css_6964'>\n                        #footable_6964  {\n        font-family: inherit;\n        font-size: 14px;\n    }\n\n                <\/style>\n                \n    \n    \n<\/div>\n\r\n\r\n\r\n<p>&nbsp;<\/p>\r\n\r\n\r\n\r\n<p>Carta&#8217;s calibration tool takes care of the calculations automatically. <a href=\"http:\/\/bit.ly\/3fMt22e\" target=\"_blank\" rel=\"noreferrer noopener\">Log in to estimate changes in portfolio value in seconds.<\/a><\/p>\r\n\r\n\r\n\r\n<h2>Who can use the calibration tool<\/h2>\r\n\r\n\r\n\r\n<p>Any VC firm who has accepted a preferred certificate on Carta can use the free tool when they log in. If you are a member of a VC firm and do not have access to the calibration tool, <a href=\"mailto:investorservices@carta.com\" target=\"_blank\" rel=\"noreferrer noopener\">reach out to our support team<\/a>.<\/p>\r\n\r\n\r\n\r\n<p>Calibration was included in the AICPA\u2019s recently released guidance for fund valuations, <a href=\"https:\/\/www-staging.carta.com\/sg\/asc-820\/\" target=\"_blank\" rel=\"noreferrer noopener\">FASB ASC 820<\/a>. <a href=\"https:\/\/www-staging.carta.com\/sg\/blog\/impaired-valuations\/\" target=\"_blank\" rel=\"noreferrer noopener\">Read more details on valuations here.\u00a0<\/a><\/p>\r\n\r\n\r\n\r\n<h2>What\u2019s next<\/h2>\r\n\r\n\r\n\r\n<p>If your firm is audited, and you estimate that portfolio companies\u2019 valuations have changed significantly, you\u2019ll need an ASC 820 valuation.<\/p>\r\n\r\n\r\n\r\n<p>Carta\u2019s team of experts can help. <a href=\"https:\/\/www-staging.carta.com\/sg\/requestdemo\/?organization=InvestorServices\" target=\"_blank\" rel=\"noreferrer noopener\">Reach out to our team to learn more about our ASC 820 valuations.<\/a><\/p>\r\n\r\n\r\n\r\n\r\n<hr class=\"wp-block-separator\" \/>\r\n\r\n\r\n<p class=\"has-small-font-size\">DISCLOSURE: This communication is on behalf of eShares Inc., d\/b\/a Carta, Inc. (&#8220;Carta&#8221;). This communication is not to be construed as legal, financial, accounting or tax advice and is for informational purposes only. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.<\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>Carta has created a free calibration tool to estimate the changes in your portfolio companies\u2019 values quickly and in bulk. Learn more and try it out.<\/p>\n","protected":false},"author":59,"featured_media":6550,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[40,66,4],"tags":[344,107,123,93,29],"acf":[],"_links":{"self":[{"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/posts\/6549"}],"collection":[{"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/comments?post=6549"}],"version-history":[{"count":0,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/posts\/6549\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/media\/6550"}],"wp:attachment":[{"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/media?parent=6549"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/categories?post=6549"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www-staging.carta.com\/sg\/wp-json\/wp\/v2\/tags?post=6549"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}