 Comparables and its implementation of multiples method is a very common approach for valuating privately head companies. The comparables approach can be applied in the context of venture capital either in the investment states or considering the exit states. The idea of a venture capital investment is that the venture capitalists invests money into a company and they want to help that company to grow. In five or some years, the investor, the venture capitalists will sell their shares for profit. We can calculate the valuation based on the time of investment or time of the exit of the venture capitalists. The idea of these investment comparables is that we look at past venture capital deals that are similar to the deal that we are being proposed and then we compare. Is our deal better or worse than these comparable deals? That provides us some idea of the valuation of the company. Exit comparables, on the other hand, look at cases where the investment target has already exited or the investor has exited from the investment target. For example, if a company does an initial public offering and the venture capitalists sells their shares at that point, we would calculate the exit value by taking the share price of the company at the time of the venture capitalists. Exit multiplies with total shares and that gives us the value raise. When we have the valuations of comparable companies, we calculate multiples. We look at, for example, what is the value divided by revenues, the value divided by earnings before income taxes. And then we use these multiples and calculate the company value or the value of our company using these techniques. Let's take a look at in more detail what these might look like. The example comes from Rinan-Helman book. So this is an investment comparables. The idea is that if you are looking for an investment, you look for comparable investments and these are supposed to be comparable to the case company. Autos are discussing. The valuations are between roughly in the three, two, three million ballpark, some are higher, some are lower. And then you can infer that the two million valuation is a bit lower than the average deal, but it's still in the right ballpark. The problem with this kind of exit comparable or investment comparables analysis is that it does not really depend on anything that the company does. So nothing here that the company does, no revenues, no growth or anything influences the prices of these prior exits. So that's the first disadvantage. It does not take really the information from the investment target into consideration. The second problem is that locating relevant deals can be difficult. While venture capital deals are collected in some databases, finding the relevant ones from a database could be a challenge. And also not all deals are listed in a database that an entrepreneur would have access to. So this is probably not as commonly used as the other comparables technique. The other comparables technique is the exit comparables. So we look at companies that have exited and here are some hypothetical companies that have made an exit. We have data about them. We have how long all the company was at the time of the exit. What was the fund? How much funding they got? What was the value at exit? So if the company was stock listed, what was the total price of that company, including all the stocks? If it was sold to another company, a strategic investor typically, then what was the sales price? And then we have revenues at exit. We have earnings at exit and we calculate revenue multipliers and earning multipliers. The idea of a revenue multiplier is that we take the valuation, 40 million, we divide it by the revenues, 30 million, and that gives us a ratio of 1.3. Now we can use that ratio to multiply the revenues of our company to get an estimate of the value of our company. So we have these different revenue multipliers, 1.3, 12.5, 0.8, 1.2, 3, 1.5 should be like the typical value. And then we have these price per earnings multipliers between 3 and 15. Then we apply these multipliers to do this kind of scenario analysis of projections. So we can have the revenue multipliers with the average, median, highest, and lowest. We have the PE multiplier, we have the average, median, highest, and lowest. Then we have a projection, I'll talk more about projections and how they are calculated, a projected value or projected funding at exit, a projected revenue at exit, and our net earnings at exit. And then we calculate these valuation estimates. So we can calculate the average value here by multiplying the amount of revenues, 21 million, with the average revenue multiplier, which is 3, so we get 73 million. 21 times 3 is about 70 million. Then we can calculate the same with earnings. So the average earnings multiplier is 8 and 3 million multiplied by 8 gives us 27 million. We can do the same thing using the median, and we get four different estimates. We can probably rule out this as an outlier, and this would give us a ballpark estimate that our company's exit value would be about 25 million dollars, something like that. So these are used to determine the exit values, and then the venture capital method that I talk about in another video is used to calculate the present value based on the exit value.