1
Q
How is competition incorporated into VC valuation ?
A
By gradually reducing growth rate to LT growth rate of mature public firms in same sector
2
Q
Why are entrepreneurial firms seeking financing from VCs ?
A
To develop their pioneering ideas into novel products
3
Q
What is the growth cycle of the firm ?
A
- During early years = high growth since little competition for a novel product
- If product = successful → drive down growth rates because of imitation
4
Q
What if there are already competitors that work on similar ideas ?
A
Useful to model competition in order to get better projections of future CFs
Matter: Private Equity
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