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June 18, 2014
Efrat Kasznik, Founder & President
Foresight Valuation Group, LLC
Startup Valuation
for Angel Investors
2Foresight Valuation Group © 2014
About Me: Efrat Kasznik
 Founder and President, Foresight Valuation Group, a
Silicon-Valley based Intellectual property (IP) valuation,
strategy and start-up advisory firm.
 Valuation and strategy expert, with 20 years of
experience analyzing IP portfolios across industries
 Lecturer, Stanford Graduate School of Business
 Chair, Cloud Committee, Licensing Executives
Society (LES)
 Top IP strategists, IAM 300 List 2013-2014
 Co-founder, CFO and Advisor to startups and
incubators in the US and Europe, including: Stanford
Venture Lab, The HUB Trieste, Astia Angel Fund
3Foresight Valuation Group © 2014
The Startup Equity Valuation
Timeline
Seed
Funding
Stock
Options
Series
A, B, C
M&A
IPO
Available Information
Low High
4Foresight Valuation Group © 2014
Angel Investment & Valuation
Angel Invest?
Priced
Not
Priced
Convertibl
e
Note
No
Fit
Preferred
Stock
How
to
Invest
?
5Foresight Valuation Group © 2014
Angel Funding: The Valuation
“Triangle”
Funds
Raised ($)
Ownership
(%)
Valuation
($)
< $1M
20%-40%$2.5M
6Foresight Valuation Group © 2014
Angel Valuation Case Study:
Floome Smartphone Breathalyzer
Customers
Production
FulfillmentFinancials
Team
7Foresight Valuation Group © 2014
Three Valuation Methods
 VC Valuation Approach
 Adjusted Comparable Valuation Approach
 Heuristic Approaches (experience based)
 Example - Dave McClure’s 5 Points
8Foresight Valuation Group © 2014
$20
Million
$100
Million
$5
Million
$2.5
Million
5X
Exit Multiple
70-80%
Discount Rate
= 20x ROI
Revenu
e in
Year 5
Value
in Year
5
VC Valuation Approach:
At Exit Point (Year 5)
Value
Today
50% future
dilution
Fully
Diluted
Value
Today
9Foresight Valuation Group © 2014
VC Valuation Approach:
Industry Standard Discount Rates
• 80%+Seed
• 50-70%Angel
• 40-60%Series A
• 30-50%Series B
• 25-35%Bridge
Sources: How Venture Capital Works , Harvard Business Review
A Method for Valuing High-Risk Long-Term Investments, Harvard Business School
10Foresight Valuation Group © 2014
Comparables Valuation Approach:
Median/Mean Round Size
Source: Halo Report 2013
11Foresight Valuation Group © 2014
Comparables Valuation Approach:
Pre-Money Valuation Range
Source: Halo Report 2013
12Foresight Valuation Group © 2014
Angel Valuation Considerations
Benchmark
s
Company
Metrics
Your
Investme
nt
Objective
s
External
Factors
• Market Size
• Partnerships
• Regulation
• Litigation
• Funding & Exits
• Comparables
• Future Trends
• Target ROI
• Exit Horizon
• Team
• Product
• Execution (Beta)
• IP portfolio
13Foresight Valuation Group © 2014
The Dave McClure
Five “Million Dollar Point”
Approach*
 Revealed by Dave McClure (500 Startups) at a
TechCrunch Disrupt Event (2011)
 Each “point” worth $1M:
1. Market
2. Product
3. Team
4. Customers
5. Revenue
>> Maximum: $5 Million
 * Efrat’s 6th point: IP (patents)>> add another $1M
14Foresight Valuation Group © 2014
Angel Valuation Resources
 Angel Resource Institute
www.angelresourceinstitute.org
 Fenwick & WestSeed Financing Survey 2012 of
Internet/Digital Media and Software Industries
 Silicon Valley Bank: The HALO Report 2013
 Center for Venture Research
https://paulcollege.unh.edu/cvr
THANK YOU!
Presentation available upon
request
Efrat Kasznik
President, Foresight Valuation
Group
ekasznik@foresightvaluation.co
m
650-561-3374
http://www.linkedin.com/in/ekasz
nik

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Startup Valuation for Angel Investors

  • 1. June 18, 2014 Efrat Kasznik, Founder & President Foresight Valuation Group, LLC Startup Valuation for Angel Investors
  • 2. 2Foresight Valuation Group © 2014 About Me: Efrat Kasznik  Founder and President, Foresight Valuation Group, a Silicon-Valley based Intellectual property (IP) valuation, strategy and start-up advisory firm.  Valuation and strategy expert, with 20 years of experience analyzing IP portfolios across industries  Lecturer, Stanford Graduate School of Business  Chair, Cloud Committee, Licensing Executives Society (LES)  Top IP strategists, IAM 300 List 2013-2014  Co-founder, CFO and Advisor to startups and incubators in the US and Europe, including: Stanford Venture Lab, The HUB Trieste, Astia Angel Fund
  • 3. 3Foresight Valuation Group © 2014 The Startup Equity Valuation Timeline Seed Funding Stock Options Series A, B, C M&A IPO Available Information Low High
  • 4. 4Foresight Valuation Group © 2014 Angel Investment & Valuation Angel Invest? Priced Not Priced Convertibl e Note No Fit Preferred Stock How to Invest ?
  • 5. 5Foresight Valuation Group © 2014 Angel Funding: The Valuation “Triangle” Funds Raised ($) Ownership (%) Valuation ($) < $1M 20%-40%$2.5M
  • 6. 6Foresight Valuation Group © 2014 Angel Valuation Case Study: Floome Smartphone Breathalyzer Customers Production FulfillmentFinancials Team
  • 7. 7Foresight Valuation Group © 2014 Three Valuation Methods  VC Valuation Approach  Adjusted Comparable Valuation Approach  Heuristic Approaches (experience based)  Example - Dave McClure’s 5 Points
  • 8. 8Foresight Valuation Group © 2014 $20 Million $100 Million $5 Million $2.5 Million 5X Exit Multiple 70-80% Discount Rate = 20x ROI Revenu e in Year 5 Value in Year 5 VC Valuation Approach: At Exit Point (Year 5) Value Today 50% future dilution Fully Diluted Value Today
  • 9. 9Foresight Valuation Group © 2014 VC Valuation Approach: Industry Standard Discount Rates • 80%+Seed • 50-70%Angel • 40-60%Series A • 30-50%Series B • 25-35%Bridge Sources: How Venture Capital Works , Harvard Business Review A Method for Valuing High-Risk Long-Term Investments, Harvard Business School
  • 10. 10Foresight Valuation Group © 2014 Comparables Valuation Approach: Median/Mean Round Size Source: Halo Report 2013
  • 11. 11Foresight Valuation Group © 2014 Comparables Valuation Approach: Pre-Money Valuation Range Source: Halo Report 2013
  • 12. 12Foresight Valuation Group © 2014 Angel Valuation Considerations Benchmark s Company Metrics Your Investme nt Objective s External Factors • Market Size • Partnerships • Regulation • Litigation • Funding & Exits • Comparables • Future Trends • Target ROI • Exit Horizon • Team • Product • Execution (Beta) • IP portfolio
  • 13. 13Foresight Valuation Group © 2014 The Dave McClure Five “Million Dollar Point” Approach*  Revealed by Dave McClure (500 Startups) at a TechCrunch Disrupt Event (2011)  Each “point” worth $1M: 1. Market 2. Product 3. Team 4. Customers 5. Revenue >> Maximum: $5 Million  * Efrat’s 6th point: IP (patents)>> add another $1M
  • 14. 14Foresight Valuation Group © 2014 Angel Valuation Resources  Angel Resource Institute www.angelresourceinstitute.org  Fenwick & WestSeed Financing Survey 2012 of Internet/Digital Media and Software Industries  Silicon Valley Bank: The HALO Report 2013  Center for Venture Research https://paulcollege.unh.edu/cvr
  • 15. THANK YOU! Presentation available upon request Efrat Kasznik President, Foresight Valuation Group ekasznik@foresightvaluation.co m 650-561-3374 http://www.linkedin.com/in/ekasz nik