1
LUNCH AND LEARN:
VALUATION OF
EARLY STAGE COMPANIES
Presented by: Gerard Buckley, Jaguar Capital
2
Who Am I
• Founder and CEO of Jaguar Capital an Advisory
Practice for Growth Stage Companies
• Chairperson of BOD, Maple...
3
Valuation - Agreement of Price to Buy & Sell
4
Valuation - Introduction
• The Valuation of a company is the price to buy
the entire company whether it is public or
pri...
5
FMV – Fair Market Value
``the price , expressed in terms of cash
equivalents, at which property would change
hands betwe...
6
Valuation – Revenue Companies
7
Valuation Methods – Revenue Companies
1. Multiple of EBITDA
2. Discounted Cash Flow
3. Comparable transaction method
4. ...
8
Valuation – Business Valuations
• Every valuation and Pricing is unique
• In a M&A Transaction price or valuation comes
...
9
Valuation – Business Valuations
10
Valuation – Pre - Commercialization
11
Valuation – Pre - Commercialization
12
Valuation – Investor Expectations
• Google, the most active M&A buyer paid < 20
mil with <20 people for 90 % of it`s ta...
13
Valuation – How subjective is it?
14
Valuation – Investor Expectations
• At the end of the day valuations are subjective
• Many VC`s will not discuss invest...
15
Valuation – Investor Expectations
• A USA with concerning terms will have negative
pressure on valuation
• Valuation is...
16
Valuation – Investor Expectations
• Valuation is caveat emptor – buyer beware.
More investors have lost more money beca...
17
Valuation Methods - Pre- Commercialization
1. Venture Capital Method (ARI)
2. Scorecard Method (David Berkus)
3. Risk F...
18
Valuation Methods – Venture Capital Method
19
Valuation Methods – Scorecard Method
30% Management - quality team in place, except sales
25% Opportunity - appears to ...
20
• Management
• Stage of the business
• Legislation/Political risk
• Manufacturing risk
• Sales and marketing risk
• Fun...
21
Valuation Methods – Shamrock Method
• Credit for Actual Invested Capital (no sweat equity)
• Up to 250K for Management ...
22
Contact Information
Gerard Buckley, BBA, FICB, ICD.D
President and CEO
Jaguar Capital Inc.
(C) 416-884-9522
(W) 416-646...
Upcoming SlideShare
Loading in …5
×

Maple leaf angels lunch and learn - valuation of early stage companies

2,458 views
2,256 views

Published on

This presentation on Valuation of Early Stage Companies was Presented at Maple Leaf Angels Lunch and Learn Series. The Shamrock method of Valuation created by the Author was introduced at this presentation.

Published in: Economy & Finance, Business
1 Comment
2 Likes
Statistics
Notes
  • Downloaded this! Looking at this again for a closer look. excellent information. we are applying this to our company. Thanks Gerard! Will chat with you soon.
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Views
Total views
2,458
On SlideShare
0
From Embeds
0
Number of Embeds
65
Actions
Shares
0
Downloads
35
Comments
1
Likes
2
Embeds 0
No embeds

No notes for slide

Maple leaf angels lunch and learn - valuation of early stage companies

  1. 1. 1 LUNCH AND LEARN: VALUATION OF EARLY STAGE COMPANIES Presented by: Gerard Buckley, Jaguar Capital
  2. 2. 2 Who Am I • Founder and CEO of Jaguar Capital an Advisory Practice for Growth Stage Companies • Chairperson of BOD, Maple Leaf Angels • Entrepreneur in Residence with Incubes • Member of SME Committee of OSC • Investment Comm of MSV University, Hfx • 32 yr. Career with Scotia Capital as a Financial Risk Management Advisor to Fortune 200 Companies: Rogers, Irving Gr, Empire Co., Four Seasons, Bruce Power, Ford, CAE etc.
  3. 3. 3 Valuation - Agreement of Price to Buy & Sell
  4. 4. 4 Valuation - 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.
  5. 5. 5 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.``
  6. 6. 6 Valuation – Revenue Companies
  7. 7. 7 Valuation Methods – 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
  8. 8. 8 Valuation – 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
  9. 9. 9 Valuation – Business Valuations
  10. 10. 10 Valuation – Pre - Commercialization
  11. 11. 11 Valuation – Pre - Commercialization
  12. 12. 12 Valuation – Investor Expectations • Google, 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
  13. 13. 13 Valuation – How subjective is it?
  14. 14. 14 Valuation – 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.
  15. 15. 15 Valuation – 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`
  16. 16. 16 Valuation – Investor Expectations • 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
  17. 17. 17 Valuation Methods - Pre- Commercialization 1. Venture Capital Method (ARI) 2. Scorecard Method (David Berkus) 3. Risk Factor Method (ARI) 4. The Shamrock Method (Buckley)
  18. 18. 18 Valuation Methods – Venture Capital Method
  19. 19. 19 Valuation Methods – Scorecard Method 30% Management - quality team in place, except sales 25% Opportunity - appears to be a huge opportunity 15% Product – disruptive technology, prototype done 10% Sales – team not in place , channels unclear 10% Competition – many small players, lack technology 10% Other Factors – foreign Market, partners
  20. 20. 20 • Management • 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 Valuation Methods – Risk Factor Method
  21. 21. 21 Valuation Methods – 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
  22. 22. 22 Contact Information Gerard Buckley, BBA, FICB, ICD.D President and CEO Jaguar Capital Inc. (C) 416-884-9522 (W) 416-646-6789 g.buckley@jaguarcapital.ca www.jaguarcapital.ca Twitter: @jaguarcapital Twitter: @gerardbuckley

×