Introduction
Welcome to the comprehensive guide on managing company valuations within the Eldison platform. Tailored for admins and operators of companies at various stages and sizes, this guide will walk you through the process of setting up, understanding, and utilizing company valuations to optimize the benefits offered by the Eldison platform.
What is a Company Valuation Scenario?
A company valuation scenario represents the financial worth of a company at different points in time, reflecting its past, current, and projected future values. Valuations can be based on:
Real Value: Independently determined by valuators for an objective assessment.
Estimated Value: Internally calculated by management or founders, usually in the absence of external evaluations.
Companies can have multiple valuation scenarios, each tailored to specific needs and communication strategy. The visibility of these valuations can be adjusted according to company needs.
Example of a company having 3 different valuation scenarios.
Why is Company Valuation Important in Eldison?
Company valuations play a crucial role in the Eldison platform for several reasons:
Clear Communication: They ensure transparency and understanding of the company’s worth among participants, crucial for calculating participants' portfolio values.
Motivation: Future projections of portfolio values serve as a motivational tool for employees, linking their efforts to the company's financial growth.
Easier Operations: They streamline ESOP management by providing a clear references for asset pricing in various processes.
Setting Up Valuations
Valuations can be added and edited manually or through an excel import feature.
You can find under Company -> "Valuation scenarios" or following the link: https://YOUR_PROJECT.eldison.com/company/valuations (just change YOUR_PROJECT for the project subdomain you are using).
Import
The most efficient way to bulk import valuation data is via the import feature. The import file contains only two columns: valid from date and value. By downloading the template, you will automatically add all current values into the template, making it easier to manage existing values. During the import, existing valuation periods are updated, and new periods are created. Omitted periods are not deleted. If you need to delete valuation periods, this must be done manually in the valuation scenario edit screen.
Export
You can also export all valuation period data from a valuation scenario. This is useful if you want to change only some values. To do this, export the file, make the necessary changes, and import the updated file back into the platform.
Advanced Settings
Primary Valuation Scenario: This valuation scenario will be used as the default value for the price per asset across all processes. You can select only one valuation scenario as primary.
Public valuation scenario: Used to calculate participant’s portfolio value. This can’t be hidden from participants.
Hide from Participants: Configures which valuations are visible or hidden from participants, crucial for portfolio calculations.
Examples
Simple Setup: Company A
Background: Phantom plan post-seed investment.
Communication Strategy: Transparent communication, sharing all valuation details with participants.
Valuation Scenario:
Company Valuation & Forecast: Contains past actual valuations and future forecasts.
Simple Setup: Company B
Background: Preparing for Series A, no independent valuations.
Communication Strategy: Clear and simple information dissemination - one valuation forecast.
Valuation Scenarios:
Fair Market Value: Includes pre-seed and seed round data, primary but not shown to participants.
Valuation Projection: Management’s future valuation forecast, shown to participants.
Complex Setup: Company C
Background: Post-Series A with a stock option plan.
Communication Strategy: Diverse valuations without exposing sensitive past data.
Valuation Scenarios:
FMV Valuation: For internal initial value setting, hidden from participants.
Conservative Scenario: Monthly reviewed management forecast, visible on Eldison.
Ambitious Scenario: Optimistic monthly forecast, also shown on Eldison.
Recommendations
Based on our experience, we recommend following the examples provided above. If possible, it is always beneficial to share more valuation scenarios rather than fewer. For clarity, it is advisable to differentiate scenarios by their nature—values from past investment rounds and future management projections should be presented in separate valuation scenarios.
Conclusion
Effective management of company valuation scenarios on the Eldison platform is key to transparent and efficient ESOP administration. By understanding and implementing various valuation scenarios, companies can better communicate their value, motivate their employees, and streamline operations.
For additional information or specific inquiries, please refer to Eldison Support.