1.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p1
Increase the
Valuation of
Your Startup #StartupValuation

2.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p2
Molly Otter
Chief Investment Officer
Lighter Capital
+10 years as a lender working
as a generalist across all
segments of the capital
structure.
Today’s Presenters
David Ehrenberg
Chief Executive Officer
Early Growth Financial
Services
+10 years experience in
helping early-stage companies
with accounting, finance, tax,
valuation services.

3.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
› Mission: make fundraising
process more efficient utilizing
technology and alternative
structures
› Funded +70 tech companies:
Most active revenue-based
finance lender in the country
› $50K-$1M in growth capital
› Entrepreneur-aligned structure
About Lighter Capital

4.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 4
“Startups face a huge burden in today’s
economy, often having to choose
between funneling resources toward
creating their goods and services or
managing the often complex
accounting, tax and financial strategy
planning necessary to run a successful
business.”
~ David Ehrenberg,
Founder and CEO
Early Growth Financial Services

5.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
Today’sAgenda
Why is valuation important in startup land
Different types of valuation
The components that go into startup valuation
How to effectively demonstrate traction to investors
Examples of milestones that matter
p5

6.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p6
Why is valuation important for startups?
1. What % of equity can you give up in exchange for cash?
2. How much can you extract from your company in the long
run?
3. How do you attract talent and investors?
4. Where do you stand in your industry?

7.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 7
Business valuation
409A valuation
Startup valuation
What does “valuation” mean?

8.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
Business valuations = company price
Calculations based on:
› Cash flows (current and
projected)
› Value of physical and
intangible assets
› Existence of readily identifiable
potential strategic buyers
› Market sentiment
8

9.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
409A valuations = value of business’
common stock
(utilized for issuing stock options)
› IRS requires Fair Market Value
(FMV) analysis in conjunction with
stock option grants
› If you are acquired by a public
company, a Big Four accounting
firm is likely to audit your approach
to IRS compliance
› Reports are generally valid for 12
months – even if there’s been no
financing activity, you’ll still need a
new valuation annually

10.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
What impacts a company’s 409A valuation?
› Company
milestones
› IP
› Industry’s
competitive
dynamics
› Strategic
partnerships
› Your investor base
› Quality of
management team

11.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
Startup valuations =
what someone is willing to pay
11

12.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 12
As measured by
market growth rate
Opportunity size

13.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
Comparables
13
 Based on recent financings or exits
 Look for companies that are similar to you:
.
Stage
Progress
Size
Team
Composition

14.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 14
Market sentiment
 How hot the space is at
any given moment
 What the competition
looks like

15.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
Team
15
› Who’s on the team
› Advisors? Board of
Directors?
› Team members’
domain expertise
› Track record
› Reputation
› History of prior
success

16.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
Traction
› Growth numbers
› Measured as anything that shows that you are picking up
speed…adoption of your product/offering
16

17.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p17
Demonstrating traction
Revenue
User
Adoption
Traffic Churn Brand

18.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p18
Don’t’ forget about the cash burn!
› Burn is a very important ingredient in showing traction
› Anyone can show traction if they have unlimited funds!
› Be able to justify your burn with your growth rate
At Lighter Capital, we have a
hard rule about lending
companies with burn

19.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p19
How to create and hit your milestones
› Investors will want to know “how?”
› Create budget and work
backwards to set milestones
› Show thought / accounting behind
your milestone projections, e.g.
› In the past, when I’ve added a sales
headcount, I’ve been able to get X more
customers a month. So if I hire X more, I
can expect a X% growth in customers.

20.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p20
Growth milestones
› Examples:
› Reach breakeven in 6 months
› Acquire 3 new Fortune 500
company customers in Q2
› Release a product extension by
September 1, 2015
› Double revenue year-over-year
Milestones should be
quantifiable and
associated with
a timeline.

21.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p21
When milestones backfire…
› Your past performance and projection don’t add up
› You don’t know your numbers
› You don’t have a plan to reach those milestones

22.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p22
› Every time you
raise should be
after you’ve
successfully
completed a
step function
› Know how
much you need
to raise to
reach the next
step

23.
LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015
Q&A
Visit Our Website
www.lightercapital.com
Apply Online
www.lightercapital.com/apply
See If You Qualify
www.lightercapital.com/how-it-
works/see-if-you-qualify
Visit Our Website
www.egfs.co
Contact Us
415-234-3437
Follow Us
@EarlyGrowthFS