Every Valuation Process Starts With Two Questions

Before selecting a valuation methodology, building a model, or discussing a valuation conclusion, investors typically need to answer two very different questions:

👉 What do we know about the company?

👉 What do we know about the investment?

These may sound similar.

In practice, they are completely different information-gathering exercises.

1️⃣ Understanding the Company

The first exercise is understanding the company's current circumstances.

Questions might include:

• Is the business performing as expected?

• Have key milestones been achieved?

• Has growth accelerated or slowed?

• Has the cash runway changed?

• Have new opportunities emerged?

• Have new risks appeared?

• Has management's outlook changed?

This information often comes from:

📊 Financial statements

📈 KPI reports

📋 Board materials

💬 Management updates and conversations

Ultimately, you're trying to answer one question:

Has anything happened that changes how we view the business?

2️⃣ Understanding the Investment

The second exercise is understanding the security that the fund actually owns.

Questions might include:

• Has a new financing round occurred?

• What price was paid?

• Who participated?

• Were there secondary transactions?

• Has the cap table changed?

• Were SAFEs or convertibles issued?

• Were any rights amended or introduced?

This information typically comes from:

📄 Financing documents

⚖️ Legal agreements

📑 Transaction records

🧩 Cap table data

Here, you're trying to answer a different question:

Has anything happened that changes how value should be viewed or allocated among investors?

Only Then Does the Valuation Work Begin

Once both sets of information have been assembled, investors can start addressing questions such as:

• Is a recent transaction meaningful?

• Has the investment thesis changed?

• What information should carry the most weight?

• Which valuation approach is most appropriate?

• What assumptions should be applied?

In many organizations, the biggest challenge isn't the valuation model itself.

It's collecting, organizing, and validating the information needed before the model is ever opened.

The firms that run efficient valuation processes are not necessarily the ones with the most sophisticated spreadsheets.

They're the ones that can consistently bring together information about the company and information about the investment.

Because those are two different questions.

And both need answers before a valuation can begin.