Ideas To Deals Valuation

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

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Ideas To Deals Valuation

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

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