• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Lunch and Learn:  Valuation of Early Stage Companies
 

Lunch and Learn: Valuation of Early Stage Companies

on

  • 868 views

A Lunch and Learn Presentation by Gerard Buckley, MLA Member, Board Chair and Managing Director of Jaguar Capital

A Lunch and Learn Presentation by Gerard Buckley, MLA Member, Board Chair and Managing Director of Jaguar Capital

Statistics

Views

Total Views
868
Views on SlideShare
488
Embed Views
380

Actions

Likes
0
Downloads
22
Comments
0

2 Embeds 380

http://www.mapleleafangels.com 372
https://twitter.com 8

Accessibility

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Lunch and Learn:  Valuation of Early Stage Companies Lunch and Learn: Valuation of Early Stage Companies Presentation Transcript

    • V A L U A T I O N
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels AGENDA FAIR MARKET VALUE INTRODUCTION REVENUE COMPANIES BUSINESS VALUATIONS INVESTOR EXPECTATIONS PRE-COMMERCIALIZATION
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels INTRODUCTION The Valuation of a company is the price to buy the entire company whether it is public or private. It is usually quoted in the price of a share; however, for a private company you need to know the total value usually stated as Pre- Money Valuation before investment and Post- Money Valuation or Market Capitalization after investment.
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels FMV-FAIR MARKET VALUE ``The price , expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in a open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.``
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels REVENUE COMPANIES 1. Multiple of EBITDA 2. Discounted Cash Flow 3. Comparable transaction method 4. Book Value 5. Total Enterprise Value 6. Market Value 7. Liquidation Value: Forced or Orderly
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels BUSINESS VALUATIONS • Every valuation and Pricing is unique • In a M&A Transaction price or valuation comes down to the strategic value the acquirer brings to the transaction & the portion paid to the target • 65% of business owners don’t know what their company is worth • 85% have no exit strategy • 75% of their worth is tied up in their business
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels INVESTOR EXPECTATIONS • , the most active M&A buyer paid < 20 mil with <20 people for 90 % of it`s targets • An Angel Investor has an expectation of 10X • Survey conducted among USA angel groups by Bill Payne in 2012. Average Pre-Money valuation is 2.96m & Median is 2.75m an increase over`11 • The usual range of valuation for an pre- commercialized company 1 to 3 mil • A Convertible Debenture (last weeks lunch and learn) is a way to take the valuation discussion off the table
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels INVESTOR EXPECTATIONS • At the end of the day valuations are subjective • Many VC`s will not discuss investment until a price is set • A high valuation may create an orphaned financing or even worse a future down round • Businesses are sold not bought, a business should be preparing for an exit from the start • A company needs to understand the potential buyers universe (Financial vs. Strategic buyers) and what they are looking for.
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels INVESTOR EXPECTATIONS • A USA with concerning terms will have negative pressure on valuation • Valuation is calculated on a Fully Diluted Basis – all options, warrants, convertible debentures, vesting, etc. are converted for the purposes of presenting the `Capitalization Table` referred to as `Cap Table` • Valuation is caveat emptor – buyer beware. More investors have lost more money because they overpaid for a stock than has been lost due to fraud. (Warren Buffett and Benjamin Graham = Value Investing) • Concentrated sales is negative for valuation • Bootstrapping and obtaining traction will assist a company build valuation
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels PRE-COMMERCIALIZATION METHODS 1. Venture Capital Method (ARI) 2. Scorecard Method (David Berkus) 3. Risk Factor Method (ARI) 4. The Shamrock Method (Buckley)
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels VENTURE CAPITAL METHOD
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels SCORECARD METHOD Management - quality team in place, except sales Opportunity - appears to be a huge opportunity Product – disruptive technology, prototype done Sales – team not in place , channels unclear Competition – many small players, lack technology Other Factors – foreign Market, partners
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels RISK FACTOR METHOD • Stage of the business • Legislation/Political risk • Manufacturing risk • Sales and marketing risk • Funding/capital raising risk • Competition risk • Technology risk • Litigation risk • International risk • Reputation risk • Potential lucrative exit
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels SHAMROCK METHOD • Credit for Actual Invested Capital (no sweat equity) • Up to 250K for Management Team • Up to 250K for Proof of Concept or Product Validation • Up to 250K for Disruptiveness of Technology & Patents • Up to 250K for Business Model, pricing, etc. • Up to 250K for other including advisors, governance, financials, company infrastructure, etc. • Up to 250k for go to market strategy, traction, growth… • Credit for 2 years of revenue run rate up to 3 years
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels
    • www.mapleleafangels.com | info@mapleleafangels.com | 416.646.6235 | @mapleleafangels CONTACT