Valuing Shares
Collective's uses its Private Market Valuation Algorithm to value portfolio company shares. The algorithm is driven by primary and secondary transaction data and other pricing signals from the leading marketplace.
The Collective Valuation Algorithm
Collective's proprietary Private Market Valuation Algorithm dynamically prices shares of venture-backed, private-growth companies. The final resolution of the algorithm for share price includes the following:
Valuing shares being exchanged into the Fund
Establishing loan-to-value ratios for loans secured by partnership interests
Determining the Fund's Net Asset Value
Valuing limited partnership interest for quarterly redemptions
The algorithm is designed to output real time valuations of private growth companies representative of the current market clearing price for their shares (as opposed to determining the company's value based on more subjective approaches to valuation). As a result, the Fund's limited partners have transparency into the value of their capital accounts that is unique in the venture capital industry.
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price
Warren Buffett
Data Driven Pricing
The Collective Private Market Algorithm pulls pricing signals - e.g., primary rounds, secondary trades, 409A valuations, etc. - from multiple data sources. It applies the appropriate valuation method to each and then integrates the results into a final enterprise value for the company.
Price signals can be listed here with green check marks - they are:
Primary financing rounds
Secondary transactions
Bids and asks
409A valuations
Publicly reported fund marks
The algorithm converts the enterprise value to per-share prices using a cap-table model built from public filings. This data-driven process values all shares the same way, making each exchanger's percentage ownership of the fund transparent and fair.
Algorithm Pricing Signals for Example Company
