This document provides an overview of business valuation principles and methods for valuing early-stage and later-stage companies. It discusses key valuation principles such as substitution, alternatives, and future benefits. For early-stage companies, it describes the venture capital method and probability-weighted expected return method (PWERM). The venture capital method values a company based on estimating future value, determining required rate of return, and calculating post-money value. PWERM values a company by identifying potential outcomes, estimating future values, allocating values to shares, discounting to present value, assigning probabilities, and determining total enterprise value. For later-stage companies, it notes traditional methods like discounted cash flow and capitalized earnings are generally used.
Introduction to Wealth Management Industry by Miles SoftwareMiles_Software123
This presentation will help you understand the basics of the wealth management industry touching upon the following areas:
What is Wealth Management?
Why there is a need for Wealth Management?
How did Wealth Management Evolve?
Wealth Planning Process
Investment Avenues
Asset Allocation
What is Asset Management?
What is a Fund Management?
How to become a successful Wealth Manager?
If your company needs to submit a Wealth Management Advisory Services Proposal PowerPoint Presentation Slides look no further.Our researchers have analyzed thousands of proposals on this topic for effectiveness and conversion. Just download our template, add your company data and submit to your client for a positive response. http://bit.ly/37gnhEr
Introduction to Wealth Management Industry by Miles SoftwareMiles_Software123
This presentation will help you understand the basics of the wealth management industry touching upon the following areas:
What is Wealth Management?
Why there is a need for Wealth Management?
How did Wealth Management Evolve?
Wealth Planning Process
Investment Avenues
Asset Allocation
What is Asset Management?
What is a Fund Management?
How to become a successful Wealth Manager?
If your company needs to submit a Wealth Management Advisory Services Proposal PowerPoint Presentation Slides look no further.Our researchers have analyzed thousands of proposals on this topic for effectiveness and conversion. Just download our template, add your company data and submit to your client for a positive response. http://bit.ly/37gnhEr
Michal A. Kaszas ( HardWood Capital & ISTI Valuation and Strategy specialist) course Advanced Corporate Finance & Strategic Investments. Learn how to conduct strategic analysis and gain competitive advantage via Real Option valuation and application
This is a discussion of the methods and uses of business valuation techniques. This webinar was presented by Theresa Seidler-Shonat, a Business Valuation Specialist from Smith & Gesteland, a Madison, Wisconsin accounting and consulting firm.
Sprung Investment Management - Navigating Your Wealth Management Options
This presentation has been created to help you decipher your investment options
and determine if Sprung is the right advisor for you. In it we will cover...
Authors John Paglia and Robert Slee offer an alternative to using methodology designed for privately-trade companies as a means to valuate privately-traded companies. The article was originally published in the May/June 2011 issue of The Value Examiner. It is provided courtesy of The National Association of Certified Valuators and Analysts (http://www.nacva.com)
Earning Enough A Rational Approach To Investing 052010ebruck
An investment strategy should be tailored to the individual’s money personality - not to a firm's investment models. Money is not the client; people are.
How to Split the Pie, Raise Money, and Reward Contributors (Idea To IPO)Roger Royse
What’s my startup worth? How much equity should founders have? How much equity should I give to employees and consultants? How much should I give to the venture capitalists?
Silicon Valley startup attorney Roger Royse of the Royse Law Firm discusses the basic valuation and ownership issues involved in a startup’s life, from formation to financing to exit, including how to value your company and the contributions of stakeholders and investors at each step with a particular emphasis on different models, best practices and traps to avoid.
Michal A. Kaszas ( HardWood Capital & ISTI Valuation and Strategy specialist) course Advanced Corporate Finance & Strategic Investments. Learn how to conduct strategic analysis and gain competitive advantage via Real Option valuation and application
This is a discussion of the methods and uses of business valuation techniques. This webinar was presented by Theresa Seidler-Shonat, a Business Valuation Specialist from Smith & Gesteland, a Madison, Wisconsin accounting and consulting firm.
Sprung Investment Management - Navigating Your Wealth Management Options
This presentation has been created to help you decipher your investment options
and determine if Sprung is the right advisor for you. In it we will cover...
Authors John Paglia and Robert Slee offer an alternative to using methodology designed for privately-trade companies as a means to valuate privately-traded companies. The article was originally published in the May/June 2011 issue of The Value Examiner. It is provided courtesy of The National Association of Certified Valuators and Analysts (http://www.nacva.com)
Earning Enough A Rational Approach To Investing 052010ebruck
An investment strategy should be tailored to the individual’s money personality - not to a firm's investment models. Money is not the client; people are.
How to Split the Pie, Raise Money, and Reward Contributors (Idea To IPO)Roger Royse
What’s my startup worth? How much equity should founders have? How much equity should I give to employees and consultants? How much should I give to the venture capitalists?
Silicon Valley startup attorney Roger Royse of the Royse Law Firm discusses the basic valuation and ownership issues involved in a startup’s life, from formation to financing to exit, including how to value your company and the contributions of stakeholders and investors at each step with a particular emphasis on different models, best practices and traps to avoid.
The valuation is an essential part of any investment, we provided basics of thinking and calculations. It was presented in our meetup group, it can be used as referenced for future study.
Valuation models for early-stage knowledge-based/technology companiesGregory Phipps
Slide deck on valuation models for early-stage knowledge-based/technology companies delivered to The Canadian Institute of Chartered Business Valuators - Sept 18, 2014
Presentation on Fairshare Model made by Karl Sjogren on Oct. 14, 2014 to Silicon Valley chapter of Nat'l. Asso. for Business Economics.
The Fairshare Model is a performance-based capital structure for companies that raise venture-capital via a crowdfunded IPO
Raising Capital: Negotiating with Potential InvestorsFinancial Poise
Every business needs capital (cash) to fund its activities. But not all capital is created equal. At the most macro level, a business can raise cash by selling equity or by borrowing (and these alternatives are not by any means mutually exclusive).
This webinar explains the different types of capital available to fund a startup; how to identify potential funding sources; how to evaluate competing funding proposals; and how (and when) to negotiate financing terms. In addition, this webinar will address the kinds of investors for entrepreneurs to consider for their start-ups.
Part of the webinar series: The Start-Up/Small Business Advisor 2022
See more at https://www.financialpoise.com/webinars/
Raising Capital: Negotiating with Potential Investors (Series: The Start-Up/S...Financial Poise
Every business needs capital (cash) to fund its activities. But not all capital is created equal. At the most macro level, a business can raise cash by selling equity or by borrowing (and these alternatives are not by any means mutually exclusive).
This webinar explains the different types of capital available to fund a startup; how to identify potential funding sources; how to evaluate competing funding proposals; and how (and when) to negotiate financing terms. In addition, this webinar will address the kinds of investors for entrepreneurs to consider for their start-ups.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/raising-capital-negotiating-with-potential-investors-2021/
Fairshare Model presentation to Mayer Brown law firm 9.10.20Karl Sjogren
Presentation on Fairshare Model to the Capital Markets group of Mayer Brown. Mayer Brown has more than 1,500 lawyers and by revenue is the 19th largest law firm in the world. Slides added to list opportunities for clients to use Fairshare Model and major legal issues to explore.
Are you thinking about what you need to fund your company? Where do you start? Funding is not “one size fits all”. Every company has to approach their pathway to funding with a unique approach. Join our fundraising experts for an in-depth discussion of what options you have for funding and how to decide which paths are right for you and your company. Topics covered will include investment criteria, time to closing, investment range, success rates, control features, compliance requirements and the overall costs of capital from each such source.
Jean Hammond – LearnLaunchX, LearnLaunch.org, Hub Angels, Launchpad Venture Group, Golden Seeds
Robert Bishop - Goodwin Procter
In partnership with:
Founders Workbench
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how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
You don't need to meet the investor directly all the trades are done with a pi vendor/merchant (a person that buys the pi coins from miners and resell it to investors)
I Will leave The telegram contact of my personal pi vendor, if you are finding a legitimate one.
@Pi_vendor_247
#pi network
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how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
USDA Loans in California: A Comprehensive Overview.pptx
Business valuation throughout a business's life cycle, march 11, 2010 (1)
1. Which Lady Do You See?
“Value, like
beauty, is in
the eye of the
beholder”
2. Discussion Outline
Basic Business Valuation Principles
Company Life Cycle Analysis
Early-Stage Company Valuation
Venture Capital Method
PWERM
Later-Stage Company Valuation
Questions
3. Basic Business Valuation Principles
Principle of Substitution
“The value of an item tends to be determined
by the cost of acquiring an equally desirable
substitute.”
Basis for the asset-based approach –
assumes that an equally desirable substitute
for the business is to replicate all of the
underlying assets and liabilities of the
business.
4. Basic Business Valuation Principles
Principle of Substitution
Basis for the market approach – assumes
that an equally desirable substitute for the
business is to buy a business with similar
investment characteristics.
Basis for the earnings approach – assumes
that an equally desirable substitute for the
business is a business that has similar
earnings capacity.
5. Basic Business Valuation Principles
Principle of Alternatives
“In any contemplated transaction, each party
has alternatives to consummating the
transaction.”
Buyer = buy, not buy, buy something else.
Seller = sell, not sell, sell to someone else.
6. Basic Business Valuation Principles
Principle of Future Benefits
“Economic value reflects anticipated future
benefits.”
A buyer would not pay more for a business
than the present value of the future benefits
the business is expected to generate.
7. Basic Business Valuation Principles
Definition of Value
Fair Market Value:
“The price at which the property would change hands between
a willing buyer and a willing seller when the former is not under
any compulsion to buy and the latter is not under any
compulsion to sell, both parties having reasonable knowledge
of relevant facts. Court decisions frequently state in addition
that the hypothetical buyer and seller are assumed to be able,
as well as willing, to trade and to be well informed about the
property and concerning the market for such property.”
Revenue Ruling 59-60
8. Basic Business Valuation Principles
Definition of Value
Market Value
“The most probable price that a property should bring in a
competitive and open market under all conditions requisite to a
fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by
undue stimulus.”
Uniform Standards of Professional Appraisal Practice
9. Basic Business Valuation Principles
Market Value assumes the consummation of
a sale as of a specified date and the passing
of title from seller to buyer under conditions
whereby:
• Buyer and seller are typically motivated;
• Both parties are well informed or well advised and acting in
what they consider their best interests;
• A reasonable time is allowed for exposure in the open
market;
• Payment is made in terms of cash in United States dollars or
in terms of financial arrangements comparable thereto; and
• The price represents the normal consideration for the
property sold unaffected by special or creative financing or
sales concessions granted by anyone associated with the
sale.
10. Company Life Cycle Analysis
Company Life Cycle
Enterprise Value
Seed Start-up Growth Established Expansion Mature Decline
11. Company Life Cycle Analysis
Stage Focus Financing
Seed Proof of concept, prototype, business planning Personal finances, friends, family, customers, grants
Start-up Production, establish customer base Angels, venture capital
Growth Infrastructure - systems, processes, effectiveness Venture capital, mezzanine, private equity
Established Improvement, productivity, efficiency Profits, banks, private equity
Expansion New markets and distribution channels Profits, banks , private equity, IPO
Mature Declining sales and profitability, sustain cash Profits, banks
Exit Valuation, transition planning ESOP, MBO, IPO, strategic sale, bankruptcy
12. Company Life Cycle Analysis
Methods
Stage Data Risk VC DFE CE GLC GPT AB Liq
Seed Soft data, value proposition Extremely high X X
Start-up Validation, time to market High X X
Growth Preliminary revenue, may not be profitable Moderate X X X X
Established Predictable revenue, profitability Low X X X X X
Expansion Historical data, EBITDA, cash flow Moderate X X X X X
Mature Historical data, EBITDA, cash flow High X X X X X X
Exit Historical data, EBITDA, cash flow NA X X X X X X
13. Early-Stage Company Valuation
Why are Early-Stage Companies Valued?
Financing
Financial and Tax Reporting
Gift and Estate Tax Planning
Management of Intangible Assets
• Internally developed or to-be-purchased intangible
assets for sale or acquisition.
• Royalty rates related to license of patents, etc.
• Purchase price allocation.
14. Financing - Venture Capital Method
Application of method will differ depending
on stage of development.
Steps:
Estimate future value (FV) of invested capital
of company at proposed exit date.
Seed usually based on a multiple of revenue
Start-up usually based on a multiple of revenue or earnings
Growth usually based on earnings
15. Financing - Venture Capital Method
Determine cost of capital based on risk
assessment (required rate of return).
Venture Economics conducts an annual
study of venture capital rates of return by
fund type over various investment horizons.
Cost of capital generally ranges from 30% to
100% depending on risk assessment.
16. Financing - Venture Capital Method
Factors that affect determination of required
rate of return:
• Management team
• Phase of product development
• Phase of market development
• Revenue phase
• Quality and quantity of data
• Probability of success
17. Financing - Venture Capital Method
Determine present value (PV) of invested
capital, this is the “post-money” value:
PV = FV / (1 + required rate of return)term
Determine the “pre-money” value:
Pre-money value = Post-money value minus
Investment
Determine the ownership fraction:
Ownership fraction = Investment / Post-money value
18. Financing - Venture Capital Method
Determine number of shares to be issued to
investor:
Total number of shares after issuance = Original
number shares outstanding / (1 minus ownership
fraction)
Number of shares to be issued = Total number of
shares after issuance minus original number of
shares outstanding
Determine price of shares:
Investment amount / Number of shares issued
19. Financing - Venture Capital Method
1. Estimate Future Value:
Expected revenue in year of exit $ 50,000,000
Times: Revenue multiple 0.6
Future value of invested capital $ 30,000,000
2. Determine Cost of Capital (Required Rate of Return):
Required rate of return 50%
Number of years until exit event 5
Discount factor 7.59
3. Determine Post-Money Value:
Future value of invested capital $ 30,000,000
Divided by: Discount factor 7.59
Present value of invested capital (Post-money value) $ 3,952,569
20. Venture Capital Method
4. Determine Pre-Money Value:
Present value of invested capital (Post-money value) $ 3,952,569
Investment (2,000,000)
Pre-money value $ 1,952,569
5. Calculate Ownership Fraction:
Investment $ 2,000,000
Divided by: Post-money value 3,952,569
Ownership fraction 50.6%
21. Financing - Venture Capital Method
6. Calculate Number of Share to be Issued:
Original number of shares 2,000,000
Divided by: 1 minus ownership fraction 49.4%
Total number of shares after issuance 4,048,583
Original number of shares (2,000,000)
Number of shares to be issued 2,048,583
7. Calculate Price per Share:
Investment $ 2,000,000
Divided by: Number of shares to be issued 2,048,583
Price per share $ 0.98
22. Financing - Venture Capital Method
Valuation Assuming Future Dilution
If new stock is issued to later-round investors
or to new key employees, the early-round
investors expect to suffer dilution.
The effect of the dilution can be built into the
method by modeling the effect of the dilution
and adjusting the number of shares issued in
each round.
23. Financing - Venture Capital Method
Valuation Assuming Future Dilution
The ratio of the percent ownership an
investor holds at the terminal year of a
project to its original percent ownership is
that investor’s retention percent.
In order to prevent dilution, the early
investor’s ownership percentage should be
increased by the ratio of the investor’s
original percent ownership times that
investor’s retention percent.
24. Financial/Tax Reporting - PWERM
Probability Weighted Expected Return
Method.
Also known as the scenario method.
Rooted in decision-tree analysis.
Future outcomes are modeled and
probability weighted.
25. Financial/Tax Reporting - PWERM
Along with Option Pricing Method (OPM)
and Current Value Method (CVM), PWERM
has become a generally accepted method
for financial and tax reporting purposes.
Accomplishes valuation and allocation of
enterprise value across multiple classes of
stock.
26. Financial/Tax Reporting - PWERM
Steps:
Identify possible future outcomes:
• Initial public offering
• Sale or merger
• Continuation as a private company
• Dissolution
Usually the method models both a liquidity
scenario (sale or merger or IPO or both) and
a going-out-of-business scenario
(dissolution).
27. Financial/Tax Reporting - PWERM
Estimate future value for each potential
outcome
• Best sources for revenue multiples on early-stage
companies are VentureOne and PitchBook.
• Analysis must consider the need for future
financing and the milestones the company must
pass to achieve various exit events.
28. Financial/Tax Reporting - PWERM
Allocate future values to each share class.
• Analysis should consider:
– Dates and types of future events
– Rights and preferences of each class
Discount future values to present value by
class.
• Use risk-adjusted required rate of return for each
class.
• Each class may have a different required rate of
return.
29. Financial/Tax Reporting - PWERM
Assign probability to each outcome
• The National Venture Capital Association (NCVA)
tracks statistics on venture capital deals and the
probability of achieving a positive liquidity event by
financing round.
• Based on this research, the probability of achieving
a positive liquidity event for a deal declined from
25% to 40% in 2002 to 2% to 10% in 2009,
depending on the round.
30. Financial/Tax Reporting - PWERM
• Based on this research, the probability of:
– Sale or merger - approximately 10%
– IPO - approximately 4%
• 85% of deals do not generate a positive liquidity
event.
31. Financial/Tax Reporting - PWERM
Determine enterprise value by summing the
probability-weighted outcomes.
Determine the value per share by dividing
the enterprise value by the number of shares
outstanding.
32. Financial/Tax Reporting - PWERM
Facts: Series A Series B Common Total
Valuation Date End of Year 4
Number of shares 3,405,405 1,317,735 2,000,000 6,723,140
Percentage ownership 50.6% 19.6% 29.8% 100.0%
1. Identify Possible Future Outcomes:
Initial Public Offering 5 years
Sell to Private Equity Firm 8 years
Continue as a Private Firm 8 years
Dissolution 8 years
33. Financial/Tax Reporting - PWERM
2. Estimated Future Value for Each Potential Outcome:
Initial Public Offering
Revenue of $50,000,000 x MVIC/revenue multiple of 0.60 $ 30,000,000
Sell to Private Equity Firm
EBITDA of $5,000,000 x MVIC/EBITDA multiple of 7 $ 35,000,000
Continue as a Private Firm
EBITDA of $5,000,000 x MVIC/EBITDA multiple of 4 $ 20,000,000
Dissolution $ 5,000,000
34. Financial/Tax Reporting - PWERM
3. Allocate Future Value to Each Share Class: Series A Series B Common Total
Percentage ownership 50.6% 19.6% 29.8% 100.0%
Future Value:
Initial Public Offering $ 15,180,000 $ 5,880,000 $ 8,940,000 $ 30,000,000
Sell to Private Equity Firm 17,710,000 6,860,000 10,430,000 35,000,000
Continue as a Private Firm 10,120,000 3,920,000 5,960,000 20,000,000
Dissolution 2,530,000 980,000 1,490,000 5,000,000
35. Financial/Tax Reporting - PWERM
4. Discount Future Value to Present Value: Series A Series B Common Total
Required rate of return 25% 25% 30%
Years until:
Initial Public Offering 1 1 1
All other events 3 3 3
Discount Factor:
Initial Public Offering 125% 125% 130%
All other events 195% 195% 220%
Present Value:
Initial Public Offering $ 12,144,000 $ 4,704,000 $ 6,877,000 $ 23,725,000
Sell to Private Equity Firm 9,068,000 3,512,000 4,747,000 17,327,000
Continue as a Private Firm 5,181,000 2,007,000 2,713,000 9,901,000
Dissolution 1,295,000 502,000 678,000 2,475,000
36. Financial/Tax Reporting - PWERM
5. Assign Probability to Each Outcome: Total
Initial Public Offering 10%
Sell to Private Equity Firm 20%
Continue as a Private Firm 65%
Disssolution 5%
6. Determine Enterprise Value and Value per Share: Series A Series B Common Total
Initial Public Offering $ 1,214,000 $ 470,000 $ 688,000 $ 2,372,000
Sell to Private Equity Firm 1,814,000 702,000 949,000 3,465,000
Continue as a Private Firm 3,368,000 1,305,000 1,763,000 6,436,000
Disssolution 65,000 25,000 34,000 124,000
Total enterprise value $ 6,461,000 $ 2,502,000 $ 3,434,000 $ 12,397,000
Divided by: Number of shares outstanding 3,405,405 1,317,735 2,000,000 6,723,140
Value per share outstanding $ 1.90 $ 1.90 $ 1.72 $ 1.84
37. Later-Stage Company Valuation
Why are Later-Stage Companies Valued?
Exit Planning
• Sale to employees (ESOP)
• Sale to management (MBO, stock options)
• Gift/bequest to family members (FLPs)
• Charitable contributions
Financial and Tax Reporting
• Purchase price allocation (FASB 141R)
• Goodwill impairment (FASB 142)
• Equity compensation (FASB 123R, 409A)
38. Later-Stage Company Valuation
Use Traditional Valuation Methods
Discounted Future Earnings
Capitalization of Earnings
Guideline Public Companies
Guideline Private Transactions
Adjusted Net Assets
• Going-Concern Mass Assemblage of Assets
• Orderly Disposition Forced Liquidation