where the average P/E is 12 should be valued at $3 million is probably overstating the case. It has been suggested that public firms have a premium value of about 25-35 percent over closely held companies because they are more highly regarded by the financial community. It is also important to remember that public companies are subjected to greater scrutiny than private companies, so any P/E multiple that is used should be discounted to reflect that premium.24 Even with discounting, the variation in the ways in which a company can calculate earnings and the difficulty in finding a public company that is comparable make multiple of earnings a dubious measure for purposes of valuation. Nevertheless, many venture capital firms use one or another version of industry multiples.