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Ideas To Deals Valuation

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Slides on the basics of setting valuation for an early stage company.

Slides on the basics of setting valuation for an early stage company.

Published in: Business, Economy & Finance

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  • 1. Ideas to Deals Live Valuation: What’s it all Worth?
  • 2.
        • Valuation of early-stage companies is a little short of random.
        • Valuation is negotiated, there are no hard numbers especially for early-stage companies.
        • Provide a good projection of future value at a potential, future liquidity date and discount back.
        • Know comparables…What other companies, similar to yours, have generated what multiples of sales at liquidity.
        • Build value as you build the company ~ Focus on “Value Inflection Points”.
        • Focus on dollars not percentage
          • 10% of a $20 million company is worth more than 100% of a $1 million company.
        • Key Valuation Issues
  • 3.
        • Know what investors look for and expect.
        • Make sure you and the investors are on the same page. Good investors will want you to have a fair percentage of the company.
        • Know why these things are important to investors.
        • Understand the factors that influence value
        • Anticipate investor questions.
        • Look at competitive deals.
        • Learn from the process ~ Listen well
        • Suggestions for CEO’s
  • 4.
    • Pre Investment
    • Unit Holders Issued Valuation Pre-investment Post-investment
    • John Doe 500k $500k 25% 19%
    • Bill Smith 400k $400k 20% 15%
    • Jane Brown 800k $800k 40% 31%
    • ESO Pool 300k $300k 15% 15%
    • Note…ESO does not dilute
    • Total Issued $2 mil $2 mil 100% 80%
    • Post Investment
    • Investors 500k $500k 0% 20%
    • Total Issued $2.5 mil $2.5 mil 25% 100%
        • Cap Table Example
  • 5.
    • Pre Investment
    • Unit Holders Issued Valuation Pre-investment Post-investment
    • John Doe 481,250 $240,625 19% 11.5%
    • Bill Smith 381,250 $190,625 15% 9.5%
    • Jane Brown 781,520 $390,625 31% 19%
    • ESO Pool 375,000 $187,500 15% 15%
    • Investors 481,250 $240,625 20% 11.5%
    • Total Issued $2.5 mil $1,250,000 100% 62.5%
    • Post Investment
    • Investors Rd 2 1,500,000 $1,250,000 0% 37.5%
    • Total Issued $4 mil $2.5 mil 100%
    • $750,000 raised at $.50 per share; decrease in valuation of 50%
        • “ Cram Down” Example

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