Ask any small business owner raising money what the most non-transparent and contentious part of the process is, and they’ll most likely tell you it’s setting the valuation.
Navigating the valuation valley of death is more an art than a science, those who have traversed it will tell you – a rather ironic statement considering it’s a financial output. But like Mr Market and his infamous irrationality, valuations also have their own emotional drivers, often deeply disconnected from value.
But in a world of cloud accounting, discounted cash flow models and ‘AI’, does it have to be this way? Surely there is a rational panacea to all this hard thinking, competitor research, rumour and valuation innuendo founders have to grind through with investors and financiers?
Well, if the practical Scots have anything to do with it, a valuation elixir may be on the horizon for the weary founder community.
Listings Ledger, a spin out from the University of Strathclyde claims its patent pending real-time company valuation technology will help smaller firms access corporate finance by providing more transparency and rigour and less manual calculation. The platform crunches data from Companies House and stock market financial data to calculate an up-to-date valuation.
An on point, no-debate-to-be-had-here valuation is a big promise, and no doubt there is a lot more to the secret sauce than just what’s been talked about in a few press releases to date. For example, how are new companies that don’t have listed stock market peers treated, or private company competitor data analysed and factored? And, at the end of the day, isn’t price just a reflection of opinion – how is this accounted for?
Having both raised money to fund a business and used secondary markets for buying and selling unlisted shares in small companies before, there is no question that technology like what Listing Ledger proposes could go a long way in making it easier for parties on all sides of the financing table. But getting those involved to ‘buy’ into the process and put all their pre-conceptions aside about how a business should be valued may be the hardest thing of all.
Then again, I did read the Holy Grail itself is rumoured to reside in Scotland, so perhaps its birthplace gives Listings Ledgers all the location ‘edge’ it needs. Now that would make a great marketing campaign.
Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.