How to value and account for private companies and funds, angel investments, and crowdfunded shares [Members]
For MOGULS by The Investor
on December 5, 2025
Note: at nearly 7,000 words, this deep dive into how to account for private assets in your record keeping is the longest piece we’ve ever published on Monevator. As such I’m aiming for it to be a ‘doubler’, to tide Moguls over the Christmas period and into 2026. Feel free to save it for Boxing Day!
Previously we’ve discussed how the recovery in the stock market since 2022’s speculative share rout has not lifted all boats. Especially not the unlisted but metaphorically listing private ones.
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![Checking in on private companies and crowdfunded investments [Members]](https://monevator.com/wp-content/uploads/2025/09/flight-to-crap-9-2025-1024x960.jpg "Checking in on private companies and crowdfunded investments [Members]")
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Holy crap. Way over my pay grade, but the best of British luck to ya! Definitely white space here be dragons…
@Ermine — Hah. It’s an article I’ve wanted to write (and read!) for a long time, but perhaps I’ve finally jumped the shark, length-wise…
I think valuing a private business is akin to an educated guess plus or minus anything you like !
I have discussed a valuation of a commercial property I have held since 1990, with a valuer, who sold the property to me in 1990. We know the building and the regional market.
This should be a trivial question, there is a good length of lease, it’s repairing/insuring, reliable tenant. However there are enough variables that I could legitimately argue the value is anywhere from +/- 60% of the value I settle upon by very modest adjustments.
The property could be sold to an investor for the income stream ( staircase to 9.5% for final 5 years) and there is a reversionary value when finally vacant, ( slightly lower than the value now) , we pick a suitable discount rate, based on the strength of the tenant. (We settled on 7.5%) the price per sq foot of comparable property. Except there are very few freehold properties available..
There is possibly some capex ( approx 2 years income ) required IF government enforces EPC rules to let a commercial property but a sale to an owner/occupier would not require it. There may be uncertainty of what the final rules will be…
Experience suggests that the official valuations presume a declining value but having owned the property since 1990 that’s not the case ( a good location on a ⅓ acre, the building value may go down a lot but the site value is getting stronger ) the capital value is up by around 250% over the period. About 1% over inflation, a nice result.
In theory, following best practice, the value is that to an investor now and declining to the reversionary value over the next 9 years but experience suggests the reversionary value will climb with inflation plus 1%. IE it will not decline as the lease length shortens.
So that the value I will keep in my ‘books’ and see where we are in 2034.
Given the allowable uncertainty of a very clearly defined asset, then I have significant suspicion of the values of property in Property Investment Trusts and funds
I believe it’s very hard for the amateur investor to have a good handle on the value of private investments, there is a massive asymmetry of information.
Another excellent deep dive @TI. One that lands squarely right in the middle of that uncanny valley between “we all know this is guesswork” and “we’re still going to put numbers on it anyway”.
What struck me most about your piece was how it simultaneously demystifies private market valuation and renders it as an art, rather than science.
Gently kicking the tyres on that impression (that there’s no meaningful toolkit beyond vibes, last round marks, and a personal pessimism dial set somewhere between 30% and 70%): On the one hand, fair enough. This is DIY investing, not Baillie Gifford HQ. But, on the other, I think that you slightly underplay just how accessible real valuation frameworks have become.
Retail investors now have serviceable DCF / reverse DCF templates, free comparables databases, even basic illiquidity models. We’re no longer limited to back of envelope EBITDA multiples, and the mumbled prayers of the anxious (there are no atheists in a foxhole) amateur investor.
And there’s a lot of regulatory nuances (e.g. IFRS 13 fair value) and tax implications beyond EIS/SEIS.
That said, your emphasis on discounts is spot on.
The problem isn’t that a 60% haircut is “wrong”. It’s that pretending precision exists in a fundamentally untradeable instrument is.
A mechanical discount is at least an honest nod to uncertainty and the fact that most crowdfunded cap tables resemble Jenga towers after a toddler session.
And we should all acknowledge where those discounts come from: adverse selection, asymmetric information, option like payoffs and the real risk that your ordinary shares may not be kissing the same bride as the VCs at exit.
But public markets are also far from perfect. They have become dominated by index funds and systematic strategies that purchase securities regardless of price or fundamentals.
When substantial capital flows into markets through vehicles that don’t evaluate individual security prices, then ETFs tracking indices, target date funds, quantitative strategies create price insensitive demand, destroying authentic price discovery.
Securities become correlated not by fundamentals but by index membership. The pushes prices above fundamental values and amplifies volatility when flows reverse, since fewer active traders remain to stabilise prices through arbitrage.
Obviously, VCs and PE houses would say that, in stark contrast, private markets require committed capital analysis for every transaction.
Illiquidity forces diligence. Investors cannot outsource decisions to an index.
Each deal demands negotiated pricing reflecting specific circumstances.
Hence the…ahem..fees. Lots of fees.
And so, they’d say, this exercise of (expensive) expertise (arguably) restores genuine price discovery.
But… then they would say that, wouldn’t they? (and Mandy Rice-Davies applies)
Sure, it is arguable. What isn’t these days?
But it’s all BS, nonetheless. As Sam Rogers and John Tuld put it in Margin Call:
SR: “And you’re selling something that you know has no value.”
JT: “We are selling to willing buyers at the current fair market price.”
That may (or might not) be ‘truth’, but it is wisdom. And I’ll take that for valuing private or public markets anytime. If 2025 does prove a turning point for private market ‘valuations’, then we’ll need more of this realism.
@Delta Hedge — Cheers for the thoughts. There are certainly frameworks available. I mention DCFs in the piece, or using an LLM to outline a framework for you. However I earnestly believe that unless you know the company/sector very well it’s likely to prove an (informative) exercise in spurious precision, versus using one of the other methods such as ‘last valuation’ or ‘sector peer average’ or ‘multiple of last declared EBITDA’ (perhaps with a kicker/demerit depending).
What drives DCFs etc is the inputs. Even with a fairly involved model (say a where you’re incorporating GDP growth estimates, commodity prices, per-site growth rates versus head office cost growth rates) you can usually get a very wide range of estimates depending on your inputs (and of course the discount rate, and even more so you terminal assumptions) and as an external private investor in a private company you are extremely unlikely to have good inputs, unless as I say you have some special knowledge or insight. (e.g. You work for a competitor, relevant trade press or whatnot.)
I have had investments in promising seeming start-ups where they’ve put numbers on growing revenue and talked about EBITDA margin increasing by X% and they’ve gone bust literally six months later. So I doubt that in most cases we’re going to be able to make fine-tuned assumptions about internal margins or profit growth or whatnot as external investors.
I’m even sceptical about DCFs / complicated frameworks with public equities, where lots of data is available.
That said I do simple ones every week or two. But I more use them to explore ranges of valuations, or to try to get a handle on what is driving a current valuation (and what might move it). For instance, a trivial example would be to see what’s being priced into something like nVidia right now, over the next ten years. (Even then it’ll be dominated by the terminal rate almost certainly.)
This is more relevant with public equities though where you can actually do something depending on Mr Market’s mood swings. You can’t with unlisted stuff, so it’s all a bit moot.
So this isn’t a case of not knowing about the tools or how to use them.
It’s case of, in my view, it being better not to fool yourself by using the tools.
Cheers!
Aside from indiscriminate ‘capet bagging’ in the ISA by a grand apiece into every listed IT specialising in either exploiting the discounts of other ITs holding unlisted assets (e.g. MIGO / AVI) or in pre-IPOs (e g. RKW); my only other experience of this is SEIS.
YMMV of course, but I mentally carry the SEIS contributions at the value of the tax relief.
The tax relief is my liquidity, effectively, but liquidity given as a credit against my SATR Inc Tax liability, rather than as a cash exit.
And that tax relief is a genuinely valuable asset, readily quantifiable and, unlike crowdfunding etc, one which is, in a sense, ‘realisable’ within a year or two (depending upon when exactly the SEIS certificates for each company come through).
So, in this approach, for every £10k of money in, then, with the £5k (50%) relief as a credit, and with loss relief also available (although it may take a while before the losses can be claimed, and actually used, in tax terms); the carrying value, in terms of the tax asset, is £7,000 for an HR, and £7,250 for an AR, payer.
In other words, if you’re an HR payer, then you’ll not be worse off, ultimately, as compared to not using SEIS, unless the investment falls over 70%.
Rereading the complexities and pitfalls of private market valuations, as set out so thoroughly and so eloquently by @TI above; I’m now wondering / questioning whether mine is a reasonable approach to mentally accounting for the SEIS investment value (?)
It’s less of a Buffettesque ‘price is what you pay and value is what you get’ diptych; and rather more a value, an accounting, and a price paid triptych.
A trilemma if you will.
With DCFs, an honourable mention should also go to the merits of ‘reverse’ DCFs.
Much more useful IMHO than the plain vanilla DCF.
Noone knows what to put into a DCF, of course (and garbage in, garbage out); but reversing a DCF flips the script and lets you see what assumptions have been used to get to a given price/valuation.
You can then run your own preferred personal reasonableness ruler over those assumptions.
One wonders what a reverse DCF would show about the underlying assumptions being used to ‘value’ start up DualEntry (as highlighted in the TechCrunch piece in the W/e MV links) at a chunky / rose tinted $415 mn, all on just ~$400,000 of Annualised Recurring Revenue 😉