For What It's Worth!

Where is 157 Headed?

Sat, 24 Oct 2009 12:16:09 -0700

A final update from Boston. On Wednesday morning, October 21st, one of the final sessions of this year's ASA Conference focused on Hedge and P/E/ Funds: Valuation Needs. The panel of representatives from the Big 4, David Gross, Andrew Pappania, Stephan D. Thollot, CFA and Andrew Thorne shed some light on both the current state of the market and the ever-changing regulatory environment. Here are some highlights:

IFRS/GAAP discussion at ASA Boston Conference

Wed, 21 Oct 2009 16:19:00 -0700

A quick recap from IFRS/GAAP discussion at ASA Boston Conference. Michael Taylor, Senior Manager, BV & Reorganization Services, Deloitte Financial Advisory Services, LLP, gave an interesting overview of pending issues relative to IFRS.

Here are some highlights and my thoughts relative to the conversion:

Another Take on the Economy

Mon, 19 Oct 2009 15:38:14 -0700

Dr. Robert J. Shapiro: Another take on the economy. I enjoyed the opening speaker at the ASA conference in Boston. After a rousing introduction that included "these are the worst economic times we have seen in years," it's cold and rainy in Boston, and one of our colleagues suggested that Dr. Shapiro lightened the room with some interesting thoughts on the U.S. economy. Here are the high points:

'It's the Economy Stupid'

Mon, 05 Oct 2009 12:19:16 -0700

This past week, I attended the CEO Forum in Denver, hosted by Vistage International and a number of other local accounting firms/organizations. The guest speaker - who held a room of 300 or so CEOs for three plus hours - was Brian Beaulieu with the Institute for Trend Research and ecotrends.org. I listened to Brian back in 2007 and had three key takeaways at that time: 1) the housing market is going to burst (I think that one is obvious); 2) get out of equities (October 2008 anyone?); and 3) your goal should be to have as much cash on the sideline as you can by the fourth quarter of 2009 as home prices will be bottoming. Hence, this year when he returned to Denver I made some room in my schedule. As a result, here is a quick recap of the takeaways that struck me on Tuesday morning from Brian's talk. Remember he is an economist, and we all know how it's such an exact science.

The FAS 157 Valuation Situation

Tue, 15 Sep 2009 11:09:34 -0700

For many of us FAS 157 is still new. Yes, several of you may have muddled through it last year, but what really occurred at year end could best be described as an eleventh hour fire drill. What is very important to keep in mind is that the steps to comply with FAS 157 continue to evolve within each of the big four audit firms. However, we know one situation that is not changing and that is transparency. Your auditors are almost certain to ask for more information than last year, seeking greater transparency into portfolio company data and comparing that data to prior year assumptions. In addition, we know that independence can play a critical role. However, by working with a third party (which clearly is not required) the auditor is able to rely on a specialist and thereby reduce their billable hours. While there is an incremental cost of hiring a specialist, the tradeoff will likely be reduced audit fees and more importantly "free up" and enable internal resources to focus on their core competencies.

New FAS 157-g Valuation Guidance

Mon, 15 Jun 2009 14:54:50 -0700

Late last week, the FASB released FSB FAS 157-g -- the proposed staff position of the FASB regarding the valuation and reporting of interests held by investment companies, specifically, private equity and venture capital firms. The primary focus of the staff's attention is on the applicability of adjustments (i.e. discounts) applied to the reported net asset value. The concern is that a limited partner's interest is some amount less than the NAV reported by the general partner. We encourage you to review the statement and share any thoughts or comments with our team. We will submit a comment by the July 9th deadline and keep you posted on the final outcome.

http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176156228477

BOOT Camp - Lessons learned from West Point

Thu, 14 May 2009 12:10:12 -0700

I just returned from Village Venture's CEO & Partner Fund Leadership Boot Camp. Quist was one of the sponsors of the event held at West Point to discuss leadership in times of crisis. It was an incredibly unique and rewarding experience. The lessons of what is required to successfully lead troops into battle were amazingly applicable to the challenges entrepreneurs face in leading their companies through difficult economic times.

A Tale of Two GPs

Tue, 28 Apr 2009 14:46:34 -0700

As an investor that dabbles in alternative investments, I now understand the confusion FAS157 has generated for LPs. I was digging through my audited financials for year-end and noticed some dramatic differences in reported fair value. How dramatic? - 4x dramatic. This is for the identical company, same classes of stock and same valuation date. Fair value reported for one GP was 4x what the other reported:

Both of these particular general partners use Big 4 auditors. So am I making any money? I think I know that answer....

Spring = Baseball

Thu, 23 Apr 2009 17:00:32 -0700

With Boulder scheduled to have our first 80 degree day today - what else can you do but head outside:

We clearly have the little league championship wrapped up!

Sunny Seattle?

Tue, 14 Apr 2009 14:56:51 -0700

Seattle gets a bad rap for having perpetual clouds - but Tuesday was postcard perfect. I didn't take the picture below, but in my previous visits to the area I have never seen Seattle under sunny skies, and it was spectacular. I spent a few days making the rounds, visiting start-ups, lawyers, auditors and VCs. The news on the ground was also positive. Many companies are continuing to execute in this tough environment and the other piece of good news is the level of capital available in the region.

A common refrain at Venture Capital in the Rockies last month was the lack of dry powder for new investments. With over $1 billion flowing into Pacific Northwest funds over the last few years, there's still plenty of capital of available here. I'm looking forward to my next visit - hopefully the sun will still be shining.

Solving the Q Cube

Fri, 27 Mar 2009 17:09:40 -0700

Are you still struggling to solve the Q Cube? For those who didn't have the pleasure of attending Venture Capital in the Rockies this year, we created a customized Rubik's cube to celebrate 25 years of solving our client's complex valuation problems:

Solving complex problems isn't easy, so if you're stuck on solving the Q Cube, step-by-step instructions can be found at:

http://www.chessandpoker.com/rubiks-cube-solution.html

Since 1984, Quist Valuation has provided valuation solutions that reduce risk through analytics. Over 25 years and 3,000 engagements. Experience Quist, 25 years of excellence.

VC and Clean Tech in Colorado

Fri, 27 Mar 2009 14:32:50 -0700

By all accounts, the VC environment is terrible (no doubt due to the global economic "meltdown"). With the credit crunch and liquidity crisis hitting so many, raising new capital is extremely difficult. But, the new administration has been unequivocal in its support of clean technology for all the obvious reasons: global warming, economic stability, national security. And, as such, Clean Tech will be the next growth engine for this (and the world) economy. Colorado seems poised to take advantage as a home to investment capital, start-ups and resources. Even while most VC firms are in a holding pattern unable to raise new monies, Boulder-base Infield Capital raised a $50 million fund last year to focus on clean technology for the transportation industry. Colorado is home to many start-up companies dedicated to the development of green technologies. Boulder's power grid is becoming a smart-grid with help from Xcel Energy. Southeastern Colorado may become site to the nation's largest solar farm, also courtesy of Xcel. Outside of California, Colorado may very well be ground-zero for the Clean Tech movement...

Spring Conditions

Tue, 10 Mar 2009 12:10:54 -0700

It's taken me a few days to reflect on this past week at VCIR. Partly, because I spent a couple hours (literally) doing a single long-run with my six year old who's just getting the hang of skiing (bad idea Dad - "let's just take the express lift all the way up"). As well as trying to rationalize the continued falling of the Dow (an intraday low below 6,500 - wow). The lot of CEOs and management teams on display was solid as usual for VCIR, yet there seemed to be a great deal of uncertainty at the conference. The venture capital community is not a group of pessimists so don't get the wrong idea. In fact, if anyone believes in a brighter future and that smart, dedicated entrepreneurs will change the world we live in, this is the group. While I am sure that everyone at the conference had a different take on the reason or amount of uncertainty, for me the anxiety is simple - it's the economy, stupid. We have been fortunate to work with great management teams with great ideas that are meeting and beating expectations, changing their plans when necessary on a dime, rethinking the right way to approach the market, dedicated to a vision, a strategy, a future, most of which currently were developed based on the economy of 12 to 18 months ago. How will today's market impact their business? Can they survive the contraction? Can they get more money? Can they become profitable in time? Can they sell in a market void of buyers?

The simple fact is that the ski report in BeaverCreek this year says it all -

Spring Conditions: This is the spring version of Variable Conditions. Like variable conditions, this term is used when no one surface can describe 70% of the terrain open for skiing. It is not uncommon for other evidence of spring to be present such as a bare spot, a discolored surface from melting and traffic

Watch out as you might just hit a bare spot! Just in case you're not a skier, a bare spot can launch you flat on your face and yes it hurts. On the other hand, there is nothing like skiing in Colorado when the bumps are soft, you can leave your jacket in the car, and the most important thing to remember is sunscreen.

Venture Capital in the Rockies: 2009

Fri, 06 Mar 2009 16:08:45 -0700

Over 300 venture investors, CEOs, entrepreneurs and service professionals gathered in unseasonably warm Beaver Creek, CO to sneak a peak at some of the most promising emerging growth companies in the Rocky Mountain region this week. In addition to the 24 presenting companies, there was also a media panel moderated by Brad Feld of Foundry Group, which included Spencer Ante of BusinessWeek, Rebecca Buckman of Forbes, Dan Primack of peHUB Wire and Mark Veverka of Barron's. The panel discussed the dramatic changes facing journalism as well as the difficulties in the venture community. One highlight was when asked for their most interesting venture-backed company, Dan Primack responded with cash4gold.com. It was apropos as cash was on everyone's mind.

BVR Fair Value Conference

Fri, 27 Feb 2009 10:15:46 -0700

I just returned from BVR's 2nd Annual "Fair Value for Financial Reporting" Summit in New York. While other conferences tend to be shrinking in attendance, this event nearly doubled in size from last year. While I would like to think that my participation played a role, I think the concern over FAS 157 was more the cause.

The Summit included speakers from each of the Big 4 Valuation groups, a member of the SEC, FASB and the PCAOB. I guess Fair Value is not to be taken lightly. In addition, we heard from Cindy Ma of HLHZ discuss the valuation of Auction Rate Securities, Lynn Webber of Duff & Phelps on valuing contingent liabilities and Aswath Damodaran (NYU) discuss the merits of 157.