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Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
Valuation of startups
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Valuation of startups

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

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

Published in: Economy & Finance
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  • 1. Valuation of Startups How it happens
  • 2. In the business world, the rearview mirror is always clearer than the windshield ~ Warren Buffet
  • 3. ~ Unknown A thing is worth what it can do for you, not what you choose to pay for it.
  • 4. Where are you? Source: Wikipedia
  • 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. 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. ~ Unknown “There is always a time when you do not know the value of something”
  • 8. Convertible Debt Note There seems to be no definite basis to value
  • 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. 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. 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. ~ Ann Landers Too many people today know the price of everything and the value of nothing.
  • 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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