Question: While valuing a private company and arriving at a valuation do VCs take into consideration a discount for lack of marketability. If at all, how do they objectively arrive at a figure for such discounts?

All of our deals have a lack of marketability in their securities. Startup companies, by definition, don’t have a trading market. We don’t figure this into our valuations, as it is just part of the business of investing in these types of ventures.

One note to consider: over the past few years, there have been several firms that have formed that will purchase private company securities. So, in fact, the marketability of private companies has actually improved over time. That being said, it’s still not something that we factor in.