Valuation of startups

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Valuation of Startups - How VCs and Angels go about the process of valuing a business

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Valuation of startups

  1. 1. Valuation of Startups How it happens
  2. 2. In the business world, the rearview mirror is always clearer than the windshield ~ Warren Buffet
  3. 3. ~ Unknown A thing is worth what it can do for you, not what you choose to pay for it.
  4. 4. Where are you? Source: Wikipedia
  5. 5. Types of Investment Source Value of Investment Time of Entry FFFF / Angel 1 CR to 5 CR 0 - 24 Months VC 2 CR to 200 CR 18 - 60 Months PE > 50 CR 7 - 10 Years IPO > 100 CR 5+ Years
  6. 6. Some Milestones Source Age Revenue Valuation Investor Venture Launched 0 - 6 Months 0 20 - 50 Lacs FFFF Product Launch - Few Paying Cusomers 6 - 12 Months Early Revenue Small 1 - 2 CR FFFF / Individual Angels Stable Business - Regular Customers Found 12 - 18 Months 15 - 30 Lacs 2 - 5 CR FFFF / Angels / Seed Funds Product- Market Fit - Consistent Customer Growth 18 - 24 Months 25 Lacs - 1 CR 4 - 10 CR Angels / Seed Funds / Some VCs Business Model Fit - Clear Growth Path 24 - 36 Months 1 CR - 5 CR 10 CR - 50 CR Venture Funds
  7. 7. ~ Unknown “There is always a time when you do not know the value of something”
  8. 8. Convertible Debt Note There seems to be no definite basis to value
  9. 9. Valuation Models • Discounted Cash Flow • Forecasts several years of revenue and expenses • Discount the resulting cash flow to present value with the expected rate of return • Cost to Recreate • Usually a make Vs buy decision • Snapdeal - ebay
  10. 10. Valuation by Angels and Funds • Typically the basis of valuation is the exit • Every fund has a target and an exit value in mind, they look at see what they need to take to achieve this • They also look at the future rounds of dilution which may be needed and factor that into the valuation that they demand
  11. 11. Example • Fund Deployment required - 10 Crores • 5 Year Profit target of the company being invested in - 75 Crores • 5 Year target valuation of Business based on projected Profit - 750 Crores • Target for fund returns in 5 years - 10X or 100 Crore • Dilution asked is 100/750 = 13.33% + margin for dilution
  12. 12. ~ Ann Landers Too many people today know the price of everything and the value of nothing.
  13. 13. Download the Presentation at: http://www.slideshare.net/viveksrini Follow Us on Twitter @startups_club Follow Us on Twitter @startups_club Follow Us on Twitter @startups_club Follow Us on Twitter @startups_club

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