Your SlideShare is downloading. ×
How to valuate your company, with Capricorn Venture Partners
Upcoming SlideShare
Loading in...5

Thanks for flagging this SlideShare!

Oops! An error has occurred.

Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

How to valuate your company, with Capricorn Venture Partners


Published on

Slides of Martin & Xavier before the presentation of Tom Vanhoutte

Slides of Martin & Xavier before the presentation of Tom Vanhoutte

Published in: Economy & Finance

  • Be the first to comment

No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

No notes for slide


  • 1. Xavier Corman | Martin van Wunnik 128/05/2013 Xavier Corman | Martin van Wunnik 128/05/2013Finance for StartupsHow to valuate yourcompany, with Capricorn VenturePartnersMartin van WunnikXavier Corman
  • 2. Xavier Corman | Martin van Wunnik 228/05/2013 Xavier Corman | Martin van Wunnik 228/05/2013Sponsors
  • 3. Xavier Corman | Martin van Wunnik 328/05/2013 Xavier Corman | Martin van Wunnik 328/05/2013Finance for StartupsIntroduction• Financial Valuation Basics• Non Financials Aspects• Capricorn Venture Partners• Q&A
  • 4. Xavier Corman | Martin van Wunnik 428/05/2013 Xavier Corman | Martin van Wunnik 428/05/2013This presentation is available for free:
  • 5. Xavier Corman | Martin van Wunnik 528/05/2013 Xavier Corman | Martin van Wunnik 528/05/2013Who we areMartin van WunnikXavier Corman
  • 6. Xavier Corman | Martin van Wunnik 628/05/2013 Xavier Corman | Martin van Wunnik 628/05/2013Financial Valuation BasicsBased on Balance SheetBased on Profit & Loss StatementDCF – Discounted Cash Flowswith WACC – Weighted Average Cost of Capital& IRR – Internal Rate of Return
  • 7. Xavier Corman | Martin van Wunnik 728/05/2013 Xavier Corman | Martin van Wunnik 728/05/2013Based on Balance SheetNet Assets = Total Assets – Total long term debtsAdjusted Net Assets = : +/- adjustmentsProvisions, historical values (land, buildings),‘normalized salaries’, …Liquidation value :Not going-concern (social liabilities, C4, …)Goodwill, Customers, Patent, etc…
  • 8. Xavier Corman | Martin van Wunnik 828/05/2013 Xavier Corman | Martin van Wunnik 828/05/2013Based on Profit & Loss StatementMultiples based on:SalesEBITDAEBITTaxable ProfitNet•
  • 9. Xavier Corman | Martin van Wunnik 928/05/2013 Xavier Corman | Martin van Wunnik 928/05/2013DCF – Discounted Cash Flows
  • 10. Xavier Corman | Martin van Wunnik 1028/05/2013 Xavier Corman | Martin van Wunnik 1028/05/2013WACCWeighted Average Cost of CapitalTime & RiskThe WACC is the cost of each capital component,multiplied by its proportional weight,and then summing them up.
  • 11. Xavier Corman | Martin van Wunnik 1128/05/2013 Xavier Corman | Martin van Wunnik 1128/05/2013Cost of Equity:Which elements ?re = rf + β × (rm − rf)Capital Asset Pricing Model (CAPM)rf = risk-free rateβ = equity beta (volatile)(rm − rf) = market risk premium
  • 12. Xavier Corman | Martin van Wunnik 1228/05/2013 Xavier Corman | Martin van Wunnik 1228/05/2013IRR – Internal Rate of ReturnIRR makes DCF = 0 Present value of all future cash flow= initial investment (i.e. break even)The higher IRR, the better(when all other factors are equal)
  • 13. Xavier Corman | Martin van Wunnik 1328/05/2013 Xavier Corman | Martin van Wunnik 1328/05/2013IRR (Internal Rate Return)2383205101520253035IRR 10 % IRR 25 % IRR 50 % IRR 100 %Comparison of IRRYear 1 Year 2 Year 3 Year 4 Year 5
  • 14. Xavier Corman | Martin van Wunnik 1428/05/2013 Xavier Corman | Martin van Wunnik 1428/05/2013Evolution IRR/maturity0%20%40%60%80%100%120%Idea MVP 1st Clients Break-even Profit Sustainable growthIRR
  • 15. Xavier Corman | Martin van Wunnik 1528/05/2013 Xavier Corman | Martin van Wunnik 1528/05/20130500001000001500002000002500003000003500004000000%20%40%60%80%100%120%Idea MVP 1st Clients Break-even Profit SustainablegrowthIdea MVP 1st clients Break-even TOTALScenario 1 Capital increase 1.000.000 1.000.000Shares investor 40%Type of investor BA+VCCost of capital 100% 50% 35% 100%Scenario 2 Capital increase 50.000 200.000 750.000 1.000.000Shares investor 5% 15% + 4% = 23% 15%+13%+4%=31%Type of investor FFF BA VCCost of capital 100% 50% 35% 41%Cash needIRR
  • 16. Xavier Corman | Martin van Wunnik 1628/05/2013 Xavier Corman | Martin van Wunnik 1628/05/2013Investor’s motivationReturn on investmentSocial aspectInfluence on the management of the company
  • 17. Xavier Corman | Martin van Wunnik 1728/05/2013 Xavier Corman | Martin van Wunnik 1728/05/2013Pré-money & Post-money2,000,000500,000VALUEPre-money Investment
  • 18. Xavier Corman | Martin van Wunnik 1928/05/2013 Xavier Corman | Martin van Wunnik 1928/05/2013Valuation - What is dilution ?0%10%20%30%40%50%60%70%80%90%100%Start 1st Round 2nd Round95%81%69%5%4%4%15%13%15%VCBAFFFFounder(s)
  • 19. Xavier Corman | Martin van Wunnik 2028/05/2013 Xavier Corman | Martin van Wunnik 2028/05/2013Relution / Dilution0%10%20%30%40%50%60%70%80%90%100%Start 1st Round 2nd Round Exit95%81%69% 75%5%4%4%3%15%13%10%15% 12%VCBAFFFFounder(s)
  • 20. Xavier Corman | Martin van Wunnik 2128/05/2013 Xavier Corman | Martin van Wunnik 2128/05/2013Tools for relutionOptions (call/put)Warrants
  • 21. CapricornVenturePartnersHow to value your company?Finance for Start-Ups May28, 2013
  • 22. CAPRICORN VENTURE PARTNERSIn short23 All rights reserved
  • 23. Partners-owned20 people organisation, 20 years existenceLicensed asset manager – AIFMD compliantOver € 250 million under managementCapricorn Venture Partners24 All rights reservedICT€ 15 millionCLEANTECH€ 112 millionQuest for Growth€ 106.8 million** December 31, 2012Quest Cleantech Fund€ 11.0 million** December 31 , 2012HEALTHTECH€ 42 millionHead office, Leuven, Belgium
  • 24. DISCLAIMERThe views expressed in this presentation do not necessarily reflectthe views of the Capricorn Venture Partners or its investmentmanagers.25 All rights reserved
  • 25. HOW TO VALUE YOUR COMPANY?Capricorn Venture Partners26 All rights reserved
  • 26. Venture capital reality27Most capital get raised to address specific operational needs beforesignificant value has been created. In those instances the strategicinterest of new and existing investors to obtain or maintain a certainpercentage interest in the company prevails over the valuation models.In most cases traditional valuation models become only relevant atexit.All rights reserved
  • 27. Conventional Valuation Techniques28• Discounted cash flow• Price / earnings ratio• Price / EBITDA ratio• Price / sales ratioAll rights reserved
  • 28. Issue29Cash flow, earnings, EBITDA, sales, … ?????All rights reserved
  • 29. Alternative Valuation Techniques30• Peer comparison• Technology value• Pre-money versus post-money• 1/3 sweat - 1/3 IP – 1/3 €’s• Your value is 1 to 2 times the money you can raise• The price a fool is prepared to payAll rights reserved
  • 30. Who is afraid of dilution?31 All rights reservedWhat do you prefer?
  • 31. Pre-money versus post-money• Always differentiate between pre-money and post-money• pre-money = value of the company before the transaction• post-money = value of the company after the transaction• post-money = pre-money + capital increase• post-money = invested amount / percentage in the company• post-money = total number of shares after the transaction x price per share• Always differentiate between actual and fully diluted shareholding• fully diluted = including all shares resulting from conversion, stockoptions, warrants, or any other rights related to securities of the company• Use price per share and total number of shares fully diluted as thelegally binding values• Keep it simple32 All rights reserved
  • 32. A simple cap table example33price per share investment shares seed series A series B series C series C + SOP€ € #founders 100.000 1.000.000 80% 44% 28% 22% 20%seed investor 1 250.000 250.000 20% 11% 7% 5% 5%Series A investors 2 2.000.000 1.000.000 44% 28% 22% 20%Series B investors 3 4.000.000 1.333.333 37% 29% 26%Series C investors 4 4.000.000 1.000.000 22% 20%stock option plan 509.259 10%pre money 1.000.000 2.500.000 6.750.000 14.333.333post money 1.250.000 4.500.000 10.750.000 18.333.333 20.370.370total 10.350.000 5.092.593All rights reserved
  • 33. A simple cap table example - exit34price per share investment shares series C + SOP exit multiple€ € # €founders 100.000 1.000.000 20% 15.709.091 157seed investor 1 250.000 250.000 5% 3.927.273 15,7Series A investors 2 2.000.000 1.000.000 20% 15.709.091 7,9Series B investors 3 4.000.000 1.333.333 26% 20.945.455 5,2Series C investors 4 4.000.000 1.000.000 20% 15.709.091 3,9stock option plan 509.259 10% 8.000.000pre moneypost money 20.370.370 80.000.000total 10.350.000 5.092.593 7,7exit value 80.000.000stock-options 10%All rights reserved
  • 34. DEMONSTRATE NON-FINANCIAL VALUECREATIONCapricorn Venture Partners35 All rights reserved
  • 35. Measuring non-financial value• Separate KPIs/VIPs for the current year and towards exit• 2013 points should reflect management KPI’s and our priorities• By preference “measurable” or “achieved yes/no” points• Not every cell needs to be filled• Colour coded• Blue : status at start of year/neutral/work in progress• Green : realised• Orange : critical but solution identified• Red : critical no solution identified• Italic : changed versus previous quarter36 All rights reserved
  • 36. Key Performance Indicators& Value Inflection Points2013 towards exitCommercial Traction• Conclude multi year supply contract with keyplayer• Continue supply of product to + 5 clients• Multiple supply contracts with yearly valueabove € 500k• Diversified customer portfolio with standardproductsOperations• + 80% production yield• Ready to order additional capacity• ISO qualification• Demonstrated high yield and fast ramp-up• Second sourcing or dual location strategy inplace to reduce supply riskTechnology and IP• 600 V grounded substrate demonstrated• Solution identified and demonstrated atproduct level for current issue• Demonstrated capabilities on smaller scale• Strong and broad IP portfolio, several patentsgranted, strong patent application pipelineTeam• VP Sales on board• Strengthen team via active chairman,executive chairman or alternative solution• Conversion from a research driven team to acommercial team with demonstrated industrialexperienceFinance• Close bridge round• Close series B financing to allow• + € 5M sales• Cost leadership allowing high margin businessOther • Operations in Asia or clear plan towards Asia37 All rights reserved
  • 37. THE PITFALLS FOR START-UPSCapricorn Venture Partners38 All rights reserved
  • 38. 5 reasons why you will fail391. Don’t underestimate the time to market4. It is not easy to convince a million consumers5. In love and in business you have to let go sometimes3. Big data is not a free for all2. Beware of “It’s kind of a …”All rights reserved
  • 39. 2 reasons why you will be succesful40 All rights reservedTeam IP strategy
  • 40. Team• Get business & entrepreneurial experience in the team• Do not force researchers in a CEO role• Build multidisciplinary teams (not all engineers!)• International exposure and language skills• Humans are not scalable• Hiring new key persons that you have to pay more as the founders?• No function in a start-up company is forever• Keep you friends as friends• Foresee “good leaver – bad leaver” conditions in shareholdersagreement and stock option plans41 All rights reserved
  • 41. IP strategy• Define and challenge your IP strategy!• Protection or freedom to operate?• Does a patent has value without the associated business?• Is a licence model a valid business model?• Are you prepared for a patent due diligence by a US law firm in viewof a $ xxx million acquisition?• Any change of control clauses in your contracts withcustomers, suppliers, license agreements42 All rights reserved
  • 42. IP strategy is more than patents• Trademarks• Website• Trade Secrets• Contractual IP• Employment and assignment of invention agreements• Consultancy contracts• Contracts with suppliers and customers• License agreements• Your network43 All rights reserved
  • 43. Importance of patents• Patents are important in any phase of a VC investment !• As an information source for deal selection• Before making an investmento Strong and clean IPo Full ownership of patent(s) by the company remains the preferred model!o Exclusive license with transfer rights and right/obligation to defend sourceIP?o FTO - Freedom to operate is key• During the investment period• At exit (most likely via M&A transaction)44 All rights reserved
  • 44. THE PITCHCapricorn Venture Partners45 All rights reserved
  • 45. Pitching is a lot like dating461. Don’t order the most expensive thing on the menu4. Have realistic expectations5. Learn how to deal with disappointments3. Be aware that you will be stuck with eachother for a while2. Be yourselfAll rights reserved
  • 46. For further inquiriesContact:Tom Vanhoutte ( Venture PartnersLei 19/1, B-3000 Leuven, BelgiumTel +32 16 284100 Fax +32 16 284108http://www.capricorn.be47 All rights reserved