Software Company Valuation – And “Robert’s Rules”

We have been involved in the valuation of software for over 20 years, including buy-side and sell-side transactions.  One of our specialities is working with companies to help them understand the value of intangible software assets, and we have represented clients in court-related actions in this regard.

We’ve learned that software valuation has two perspectives – the buyer and seller, and without some form of alignment, there will be no satisfactory transaction.

Please take a look at the attached PDF summary of our views and a few examples.  The document was originally part of a presentation to technology professionals.  But before that, here’s an extract, including …

“Robert’s Rules of Software Valuation – But You Heard Them All Before”

  1. The last transaction sets the value.
  2. Investors with ready cash set the value.
  3. Competition is a good thing – validates the market.
  4. Customer lists have no long term value.
  5. Mature technology is a declining asset.
  6. The bleeding edge needs deep pockets to realize value
  7. Strategic value is huge.
  8. Patents have value if you can defend them.
  9. No one likes “hockey stick” forecasts.
  10. Human capital has value if it can be retained.
  11. Never rely only on a forecast and DCF to set value
  12. Comparables are interesting but can’t be used alone
  13. Forecasts set by sales people are worrisome
  14. Exploitable tax credits are worth about 10% of book
  15. Good will has no value
  16. Use marketing $ to get customers – don’t buy them
  17. Lines of code can’t be used for valuation
  18. Sunk development costs to date measure value
  19. Always try to leave debt behind
  20. Technology without a business has low value

There are likely many more rules, and in some cases our readers will likely disagree with our “Rules”.  Here’s the complete PDF…

Valuing Software Companies and Software Assets 2013

On the last page – our strongest advice…leave software valuation to the experts, as doing it yourself leads to problems.

Questions?  Call us at 1-888-277-1174

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