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Private Equity

Valuations – How Smart Private Equity Managers are Getting their Act Right!

Valuations – 😟 Had Always Been Worrisome! 

One of the biggest challenges in Asset Management is to arrive at the fair market price of the portfolio and the assets that are being invested in. This challenge multiplies as the portfolio becomes more illiquid with few reliable sources of valuation data. Some of the biggest fund failures over the last few years like the Third Avenue Asset Management collapse have been attributed to badly mispriced securities. 
In the aftermath of 2008 financial crisis Valuations of securities at Funds has been in focus with investors and regulators. Investor due diligence increasingly focuses on valuation policies, processes and models. Regulators across the globe have focussed on Valuation processes and increased their oversight of how assets are being valued. A big learning from the 2008 financial crisis was how lax some of the valuation processes had been with even the larger banks which created knock-on effects up and down the financial system. 
The International Monetary Fund has flagged the alternative asset managers for potential financial stability risks due to bad valuations. They are recommending strengthening oversight through the adoption of a ‘microprudential orientation’.
The shift globally in fair value accounting and its increasing importance has forced alternative asset managers to revisit the traditional valuation approaches. Private asset valuation has always been a challenge, due to the opacity of models, inadequate public companies comps, and whimsical calibration of liquidity and marketability discounts.

Globally Changing Regulatory Environment

Accounting standards like IFRS 13 and ASC 820 were the result of global recognition for transparent reporting needs. They establish a framework on fair value measurements affecting a wide group of corporate and financial institutions holding investments. IFRS and US GAAP worked jointly, developing these standards to harmonize the global accounting standards for fair value. The Private equity community responded by setting up IPEVC (International Private Equity and Venture Capital) Valuation guidelines in compliance with IFRS & US GAAP. The Alternative Investment Fund Managers Directive (AIFMD) aimed at bringing in standardized regulatory framework for private equity and other alternative investment funds came into effect in 2013 in Europe documenting the requirements in areas of, among other things, transparency and reporting in relation to valuations.
Why Portfolio Valuation Is So Important to private equity firms
All regulatory requirements apart, accurate valuation of portfolio holds great value for every private equity stake-holder by facilitating an intelligent decision making process. Timely accurate valuation and adherence to the best practices, provides relevant information to LP’s, attracting high quality investors.  
Challenges and Pain Areas in Valuation Process
For Private equity firms largely involved in investing in early stage or growth focused companies, valuation remains more a judgement call than any rules based design. The valuations are often based on level 3 inputs and accomplished with modelled data, bringing a high level of subjectivity into the process. This makes it imperative for the valuation advisor to clearly document the calibration of original investment costs to the current fair value. It helps to provide a sensitivity analysis – on how changes in unobservable inputs affect the fair value. Having an external adviser, to audit the inputs, benefits the private equity firm.
Judgement plays a critical role in choosing the valuation methodologies, for different types of assets. A substantial part of the private equity assets employ either the Income approach or DCF (Discounted Cash Flow) for valuing an asset. These models are flexible and can accommodate detailed forecasts around the cash flow of the businesses. Private investment also come with complex capital structures of the entities being valued. This could further include instruments with conversion features or other contingent claims, requiring allocation of enterprise value across the different tiers within the capital structure, often using complex option pricing techniques.
Current guidance is to combine these principal models with other valuation approaches to reach the final fair value of the asset.
When you thought it is nailed You realize, it has just begun
It becomes immensely clear that valuing Level 3 Assets in any portfolio requires accurate and comprehensive financial models. The real adventure starts once all the above factors have been accounted for. The Operational process remains messy, with few good solutions. 
There are three critical pieces to a valuation – (a) financial data, (b) financial models and (c) the modellers. The financial statements are generated and shared by the company’s CFO. It is picked up typically by the portfolio analyst at the fund, the outside auditor and often a 3rd party valuation service provider. In a frenzied messy process, multiple versions of the financial models data and reports are created by each of them. Very quickly the CFO, the analyst, the adviser and the auditor are on different pages, with different version of either the data or the model. This results in numerous inaccuracies, requiring multiple reconciliations of the final number.
How the smart asset managers are getting it right – Conclusion
Operational challenges can be more easily sorted by investing in a smart digital infrastructure. Pepper provides an integrated infrastructure for managing the models and the underlying financial data for ease of collaboration.
How Pepper Helps
  • Pepper keeps the different versions of a current valuation models and the data, so users are always on the same page as they update their inputs
  • Pepper keeps all historical financial data. This historical data for revenues, EBITDA, cash flows or any financial number can provide great value to the modeller. 
  • Users requiring more than one model for valuing every security. For example one of our clients needs 5 separate valuation methods for reaching fair market value for each security. Pepper keeps a comprehensive view of each valuation methodology and associated values.
These are just a few of the many operational challenges we solve. To learn more about Pepper and how it helps you in valuations and more, Book your Live Demo Now alternatively you may visit us at http://onpepper.com or write to us at info@onpepper.com or call us +1-732-735-1491 we are listening

Co-author : Vivek Saxena                                                                      Co-author: Pulak Sinha 
India Head                                                                                                 Founder CEO
On Pepper LLC,                                                                                        On Pepper LLC
New York, NY, USA                                                                                  New York, NY, USA

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Valuations – 😟 Had Always Been Worrisome! 

One of the biggest challenges in Asset Management is to arrive at the fair market price of the portfolio and the assets that are being invested in. This challenge multiplies as the portfolio becomes more illiquid with few reliable sources of valuation data. Some of the biggest fund failures over the last few years like the Third Avenue Asset Management collapse have been attributed to badly mispriced securities. 
In the aftermath of 2008 financial crisis Valuations of securities at Funds has been in focus with investors and regulators. Investor due diligence increasingly focuses on valuation policies, processes and models. Regulators across the globe have focussed on Valuation processes and increased their oversight of how assets are being valued. A big learning from the 2008 financial crisis was how lax some of the valuation processes had been with even the larger banks which created knock-on effects up and down the financial system. 
The International Monetary Fund has flagged the alternative asset managers for potential financial stability risks due to bad valuations. They are recommending strengthening oversight through the adoption of a ‘microprudential orientation’.
The shift globally in fair value accounting and its increasing importance has forced alternative asset managers to revisit the traditional valuation approaches. Private asset valuation has always been a challenge, due to the opacity of models, inadequate public companies comps, and whimsical calibration of liquidity and marketability discounts.
Globally Changing Regulatory Environment

Accounting standards like IFRS 13 and ASC 820 were the result of global recognition for transparent reporting needs. They establish a framework on fair value measurements affecting a wide group of corporate and financial institutions holding investments. IFRS and US GAAP worked jointly, developing these standards to harmonize the global accounting standards for fair value. The Private equity community responded by setting up IPEVC (International Private Equity and Venture Capital) Valuation guidelines in compliance with IFRS & US GAAP. The Alternative Investment Fund Managers Directive (AIFMD) aimed at bringing in standardized regulatory framework for private equity and other alternative investment funds came into effect in 2013 in Europe documenting the requirements in areas of, among other things, transparency and reporting in relation to valuations.
Why Portfolio Valuation Is So Important to private equity firms
All regulatory requirements apart, accurate valuation of portfolio holds great value for every private equity stake-holder by facilitating an intelligent decision making process. Timely accurate valuation and adherence to the best practices, provides relevant information to LP’s, attracting high quality investors.  
Challenges and Pain Areas in Valuation Process
For Private equity firms largely involved in investing in early stage or growth focused companies, valuation remains more a judgement call than any rules based design. The valuations are often based on level 3 inputs and accomplished with modelled data, bringing a high level of subjectivity into the process. This makes it imperative for the valuation advisor to clearly document the calibration of original investment costs to the current fair value. It helps to provide a sensitivity analysis – on how changes in unobservable inputs affect the fair value. Having an external adviser, to audit the inputs, benefits the private equity firm.
Judgement plays a critical role in choosing the valuation methodologies, for different types of assets. A substantial part of the private equity assets employ either the Income approach or DCF (Discounted Cash Flow) for valuing an asset. These models are flexible and can accommodate detailed forecasts around the cash flow of the businesses. Private investment also come with complex capital structures of the entities being valued. This could further include instruments with conversion features or other contingent claims, requiring allocation of enterprise value across the different tiers within the capital structure, often using complex option pricing techniques.
Current guidance is to combine these principal models with other valuation approaches to reach the final fair value of the asset.
When you thought it is nailed You realize, it has just begun
It becomes immensely clear that valuing Level 3 Assets in any portfolio requires accurate and comprehensive financial models. The real adventure starts once all the above factors have been accounted for. The Operational process remains messy, with few good solutions. 
There are three critical pieces to a valuation – (a) financial data, (b) financial models and (c) the modellers. The financial statements are generated and shared by the company’s CFO. It is picked up typically by the portfolio analyst at the fund, the outside auditor and often a 3rd party valuation service provider. In a frenzied messy process, multiple versions of the financial models data and reports are created by each of them. Very quickly the CFO, the analyst, the adviser and the auditor are on different pages, with different version of either the data or the model. This results in numerous inaccuracies, requiring multiple reconciliations of the final number.
How the smart asset managers are getting it right – Conclusion
Operational challenges can be more easily sorted by investing in a smart digital infrastructure. Pepper provides an integrated infrastructure for managing the models and the underlying financial data for ease of collaboration.
How Pepper Helps
  • Pepper keeps the different versions of a current valuation models and the data, so users are always on the same page as they update their inputs
  • Pepper keeps all historical financial data. This historical data for revenues, EBITDA, cash flows or any financial number can provide great value to the modeller. 
  • Users requiring more than one model for valuing every security. For example one of our clients needs 5 separate valuation methods for reaching fair market value for each security. Pepper keeps a comprehensive view of each valuation methodology and associated values.
These are just a few of the many operational challenges we solve. To learn more about Pepper and how it helps you in valuations and more, Book your Live Demo Now alternatively you may visit us at http://onpepper.com or write to us at info@onpepper.com or call us +1-732-735-1491 we are listening

Co-author : Vivek Saxena                                                                      Co-author: Pulak Sinha 
India Head                                                                                                 Founder CEO
On Pepper LLC,                                                                                        On Pepper LLC
New York, NY, USA                                                                                  New York, NY, USA

Source: http://altassetmanagmentdisrupted.blogspot.com/2017/11/valuations-how-to-get-your-act-right.html

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” The Leapfunder Note is a sensible and attractive way to place capital in start-ups in the Netherlands “

” Diversification is important in angel investing. Leapfunder is a platform that allows angels to spread their investments. “

” Leapfunder investing allows you to become actively involved in a start-up, just as in classical angel investing, while taking all the hassle out of transaction execution “

” Leapfunder is ideal for investing smaller amounts in a start-up in the very early stages. Such investments can be a powerful addition to a portfolio “

” With Leapfunder you get a great opportunity to build up a diversified portfolio of start-up investments, often investors can play an active role in developing the company “

” When I saw the Leapfunder proposition I thought straight-away: this is what start-ups need. I am an entrepreneur and wish this system had been available when I started my company. “

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Pieter ter Kuile

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Wouter Kneepkens

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Ronald Bazuin

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Eric van der Maten

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Eric van Gilst

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Donald Res

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Source: https://www.leapfunder.com/companies/237

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iCapital Network celebrates reaching milestones in its European and Asian expansion efforts

From: FinTech Global Alternative investment FinTech iCapital Network is celebrating reaching a series of milestones in its expansion into the European and Asian markets. The WealthTech platform is created to drive access and efficiency in alternative investing for the asset and wealth management industries. The growth across the European and Asian markets comes hot on […]

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From: FinTech Global
Alternative investment FinTech iCapital Network is celebrating reaching a series of milestones in i

Source: https://www.altassets.net/private-equity-news/by-news-type/people-news/icapital-network-celebrates-reaching-milestones-in-its-european-and-asian-expansion-efforts.html

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Medtech venture investment continues climb globally

Investors pumped $5.05bn into start-ups in growing fields such as surgical robotics, telehealth and cancer blood testing in the third quarter

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Global venture capital funding of medical technology continued its climb last quarter, with investors pumping $5.05bn into start-ups in growing fields such as surgical robotics, telehealth and cancer blood testing, industry data show.

Third-quarter venture investment rose about 4.7% from the $4.83bn that medtech start-ups raised in the second quarter, and by more than 63% from the $3.09bn they secured in the third quarter of 2019, according to data from market tracker CB Insights.

Venture funding jumped despite the novel coronavirus pandemic, which forced hospitals to postpone elective surgeries and hamstrung some companies that had been seeking to launch their products.

Yet many companies raising venture capital this year are still developing their technology and haven’t been affected by the slowdown, said CB analyst Marissa Schlueter.

Investors also haven’t let the pandemic dissuade them from betting on the potential of robotics to improve surgery and on new blood tests that could enable earlier cancer detection. In August, for example, San Francisco-based Freenome Holdings collected $270m to pursue regulatory approval for a blood test to detect colorectal cancer and Massachusetts-based Vicarious Surgical, which applies virtual reality and robotics to minimally invasive surgery, took in $13.2m.

Some medtech start-ups have fielded rising interest in their technology during the pandemic, including telehealth companies and those with tests or devices that can combat the new virus.

This month, for example, telehealth concern 98point6, a provider of virtual primary care services based in Seattle, disclosed a $118m financing.
CB Insights considered a variety of medical technology companies in its analysis, including those seeking to diagnose, treat, monitor or prevent diseases.

A strengthening market for medtech initial public offerings and acquisitions also is encouraging venture investment. In the third quarter, 40 medtech companies were acquired and 14 went public, according to CB Insights. That is up from 37 acquisitions and 13 IPOs in the second quarter. In the third quarter of 2019, 28 companies were acquired and 15 went public.
Companies’ ability to raise venture capital enables them to remain private longer and put themselves in a stronger position for an IPO, said Tom Shehab, a managing partner with Arboretum Ventures.

California-based Eargo, which sells hearing aids that fit inside the ear, incorporated in 2010 and began operations in late 2012. On Friday, 16 October, the company, which has raised more than $206.6m in venture capital according to Crunchbase, went public at $18 a share. The stock leapt 87.1% to close at $33.68.

Eargo posted $28.6m in net revenue for the six months ended 30 June, nearly doubling the $14.4m in net revenue it reported for the same period of 2019, according to a regulatory filing.
In the company’s early days, relatively few venture firms focused on medtech, chief executive Christian Gormsen said. But in raising the company’s most recent venture round earlier this year, he spoke with about 100 investors, he said.

Eargo, which sells hearing aids directly to patients, fits a growing trend toward consumers playing a larger role in their healthcare, which also increased its appeal to investors, he said. “Medical technology as a category is getting more and more attention from venture capital,” Gormsen said.

From The Wall Street Journal

Source: https://www.penews.com/articles/medtech-venture-investment-continues-climb-globally-20201027

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