Using MVIC Versus Enterprise Value When Valuing Cash Rich, Pre-IPO Tech Companies

I work at a small venture capital firm, and I’m valuing each of our VC firm's growth equity investments.

In conjunction with this, I am trying to think through some of the finer aspects specific to this process, specifically I am trying to settle on a defensible justification for using MVIC multiples versus EV multiples when valuing each of our portfolio companies. We have several portfolio companies that have excess cash, are cash-flow positive, have no LT debt outstanding, and will likely IPO in the next few years. I believe that the intent is to hold this cash for future business development and opportunistic acquisitions. For some of these, total cash holdings range from 10% to 30% of the post-money valuation at the most recent round.

I understand that generally MVIC would include the cash and EV would net cash against debt, or at least consider it a reduction in the purchase price at acquisition. However, most discussions that I've seen comparing the two don't spend as much time going into detail about this kind of situation where cash exceeds debt.

Speaking with some of our external valuation specialists, they generally recommend MVIC for companies with earlier rounds that have high growth potential and recommend EV when companies have hit some form of steady state growth. However, when cash assets on the balance sheet get so large (e.g., Apple, Google, etc.), then EV is probably a better metric.

Some existing threads on WSO that discuss MVIC versus EV include the following, but they don’t seem to touch on this as it relates to cash rich companies:

• MVIC vs. Enterprise Value
• Why Subtract Cash for EV

Some questions:

• How do you think about using MVIC multiples and EV multiples for pre-IPO tech companies?
• What levels of cash are considered excess cash?
• What other questions should I be asking myself when thinking through this process for these kinds of companies?