Valuation techniques for private markets: what valuations are, why they matter and what to use when

Private market valuations are often discussed using shorthand such as comparable company multiples (CCM), comparable transaction multiples (CTM) or the entry price from the most recent financing. Under current industry guidance for private equity and venture capital, these are only part of the toolkit. The objective is to estimate fair value, meaning the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

Valuation is a recurring fund workflow that feeds reporting, reviews and LP communication. Taghash Services runs this end-to-end with an IPEV-aligned process, audit-ready documentation and a repeatable evidence trail, so quarter closes stay predictable and valuations stay defensible.

What valuations are

A valuation is an estimate of the value of an investment at a specific measurement date, prepared using a valuation technique and inputs that reflect market participant assumptions.

In private markets, there is usually no continuous public price discovery for each holding. That is why valuation is a disciplined process of converting evidence into a fair value measurement by selecting:

• an appropriate valuation approach and technique
• inputs that are supportable
• documentation that explains the selection and what changed since the prior measurement date

Practically, valuation is not just a number; it is the technique, inputs and evidence trail that make the number credible.

Why valuations matter

Valuations matter because they are at the centre of fund credibility and decision-making.

LP reporting and transparency
Fair value measurements support investor reporting and help users of financial statements make informed economic decisions.

Fund performance measurement
Return metrics and portfolio concentration views depend on valuation consistency. Inconsistent technique selection or unsupported inputs can distort what the portfolio is actually doing.

Governance and review readiness
Best practice guidance emphasises consistency, calibration discipline and documentation of assumptions and changes, especially when inputs are not directly observable.

Portfolio decisions
Follow-ons, exits and write-downs improve when valuation reflects current fundamentals and market evidence rather than stale entry prices.

Fair value frameworks require entities to maximise the use of relevant observable inputs and minimise the use of unobservable inputs. This is why two teams can apply the same technique, such as comparable company multiples, but reach different valuation conclusions depending on the quality of inputs, the appropriateness of adjustments and the completeness of documentation.

Start with the three core valuation approaches

IFRS 13 and private markets guidance organise valuation techniques into three broad approaches: market, income and cost.

Market approach

Uses prices and market data from comparable assets or companies.

Common techniques and indicators include:

• Comparable Company Multiples
• Comparable Transaction Multiples
• Industry or sector valuation benchmarks, where they reflect how market participants price
• Available market prices and other observable price inputs where available

This approach is widely used, but it depends on selecting defensible comparables and making appropriate adjustments for differences in growth, margins, scale, liquidity and risk.

Income approach

Values an asset based on expected future cash flows discounted to present value.

Common techniques include:

• Discounted Cash Flow at the company level
• Discounted cash flows from the instrument, often used for debt-like or structured instruments, where investor cash flows can be modelled

This approach typically becomes more decision useful as cash flows become more supportable, either through business maturity or contractual terms.

Cost approach

Reflects the amount required to replace the service capacity of an asset.

In private market portfolios, this commonly appears as:

• Net Assets method, particularly for asset-heavy businesses or investment holding structures, where the balance sheet is the most relevant anchor

Why recent transaction price is not a default technique over time

In private markets, the most recent financing price can be important evidence, especially close to the transaction date. Current guidance emphasises calibration to the entry transaction, meaning you align valuation model inputs so that, at initial recognition, the technique reconciles to the transaction price when that transaction price represents fair value.

At subsequent measurement dates, the question is what has changed since entry and how that change should be reflected in the valuation technique and inputs. In practice, this means:

• Treat the recent transaction price as an evidence anchor
• Document calibration to the entry transaction as a step within the chosen technique
• Update fair value based on company progress, market movements and any new financing or secondary evidence

Techniques needed for complex capital structures

Private market cap tables often include liquidation preferences, participation features, convertibles and multiple share classes. In these situations, you still estimate overall value, but you also need equity allocation across classes based on rights and terms. Guidance explicitly supports techniques built for these structures.

PWERM: Probability Weighted Expected Return Method

Use when there are a small number of discrete, plausible outcomes and you can estimate values and probabilities for each.

OPM: Option Pricing Method

Use when outcomes are better represented as a continuous distribution and you need to allocate value across share classes given their rights and preferences.

Hybrid method: scenario-based method plus OPM

Use when part of the future is best represented through discrete scenarios and part through a distribution, which is common as companies approach but have not yet reached a clear liquidity event.

CVM: Current Value Method

Allocates equity value as though the business were to be sold on the measurement date. This is typically most relevant when an exit is imminent and outcomes are relatively narrow.

CVM is typically appropriate only when a near-term liquidity event provides a reasonably observable value anchor and should not be used as a default approach where outcomes remain wide or highly uncertain.

Backsolve: OPM backsolve

Backsolve is a commonly used application within an OPM framework that works backwards from a recent preferred financing price, using the cap table rights and assumptions such as volatility and time to liquidity, to infer implied total equity value and allocate across classes.

Backsolve should be used only when the financing is assessed to be representative of fair value and the key assumptions used in the model, including volatility and time to liquidity, are supportable and documented.

Fund of Funds and LP interests have their own anchors

When valuing fund interests, a common starting point is the reported NAV, with adjustments only when supported by credible market participant evidence, such as relevant secondary market pricing. This aligns with the emphasis on observable inputs and market participant assumptions.

Useful system labels include:

• NAV-based approach for fund interests
• Secondary market discount or premium to NAV, only when supported by credible market evidence

A practical final picklist that stays credible

If you want one set of valuation technique options that works across VC, PE, Fund of Funds and family office portfolios, this picklist is aligned with the approaches above and current private markets guidance.

1. Comparable Company Multiples
2. Comparable Transaction Multiples
3. Calibration to the entry transaction
4. Discounted Cash Flow, company level
5. Discounted Cash Flow, instrument cash flows
6. PWERM
7. OPM
8. Hybrid method, scenario-based plus OPM
9. CVM
10. Backsolve, OPM backsolve
11. Net Assets method
12. Sum of the Parts
13. Available market prices and other observable market inputs
14. NAV-based approach for fund interests
15. Secondary market discount or premium to NAV

Where Taghash Services fits

Taghash Services fits in as the execution layer for the valuation cycle. We run data packs and follow-ups, apply the appropriate technique by instrument and stage and maintain an assumptions register and evidence trail through review and sign-off. The result is fair value marks that hold up under scrutiny and flow cleanly into LP reporting and quarter-end deliverables.