This document discusses startup valuation and whether there is a bubble in startup markets. It outlines several approaches to valuation, including looking at factors like the experience of the founder team, traction, and scalability of the business model. It also examines current transaction multiples and private placements in internet software companies. While some factors could indicate a potential bubble, such as low interest rates and rising valuations, the document argues that improvements are still needed in Europe's startup ecosystem to create more serial entrepreneurs with international exits.

1. Startup Valuation and is
there a Bubble?
Herwig Springer, CEO i5invest
​h.springer@i5invest.com

2. 2 | 12/02/2015
Experience of the
founder team Product with a
Unique Selling
Proposition
Traction /
Momentum
Consistence /
completeness of
business model
Scalability of
business model
Market potential
and competition
Business Plan
and capital
required
External proof of
concept
What can you
contribute in
addition to
capital?
Fair valuation (for
the region) with
reasonable stake
Working together
over the
investment period
Exit / liquidation
event
Issues from the perspective of Angel Investor
12/02/2015
Traffic
Engagement
Registered users
Active users
Revenues
Profitability

3. 3 | 12/02/2015
What drives returns?
The following factors are positively correlated with higher
returns on the investment
12/02/2015
Source: Wiltbank/Boeker, Returns to Angel Investors, 2007
Hours of due diligence
Angel investor’s expertise in the
industry
Active participation at least several
times per month
Market for seed funding is becoming
more efficient
Proprietary deal flow is declining as a
driver of returns
Advisory support is becoming more
important (than connective support)
0%
10%
20%
30%
40%
50%
60%
<1X 1X to 5X 5X to 10X 10X to 30X >30XPercentofTotalExits
Exit Multiples
Distribution of Returns by Venture
Investment
Overall Multiple: 2.6x
Average Holding Period: 3.5 years
3 years
3.3 years
4.6 years
4.9 years 6 years

4. 4 | 12/02/2015
Venture Capital Method
The VC approach reflects the business model of invest, hold
and exit
Pre-money
value
Post-money
value
Capital
raised
Exit Value
Discount Rate
= Expected IRR
Exit Value drivers
Revenue potential
Profitability: e.g.
EBITDA
Multiple based on
revenues / EBITDA
Competitive
bidding process
Consider Dilution based on next funding rounds or option pools
They reduce value / share and pre-money valuation
Investment horizon: 5 – 8 years
Terminal Value (EUR in m) 20,0
IRR 65%
Investment Horizon (yrs) 6
Post-money value 1,0
Capital raised 0,3
Pre-money value 0,7
Share in the Company 30%
Cash on Cash Multiple 20
Efficient exit process

5. 5 | 12/02/2015
Asset-based valuation
The Asset-based valuation reflects the business model, the
status quo and a make/buy decision by a strategic investor
2/12/2015
Total asset
value
Other
Assets?
Customers
Consider traction and quality of existing customers
Replacement costs based on Customer Acquisition costs /
Future value based on Customer Lifecycle Value
Workforce
Existing workforce in place
Replacement costs / multiples
Software,
Know How
Software and Databases
Relief from royalty /
Replacement costs
Intellectual
Property
Patents, trademarks, etc.
Relief from royalty / Replacement costs
Fixed &
current assets
Office equipment and Net Working Capital
Replacement Costs

6. 6 | 12/02/2015
Valuation based on Scoring Method
Step 1: Determine the average pre-money valuation of pre-revenue companies in the
region and business sector of the target company.
Step 2: Set weighting for each category and benchmark the target company with
average pre-revenue companies
2/12/2015
Category Weighting Benchmarking Factor
Strength of Entrepreneur and Team 50% 125% 0.6250
Size of the Opportunity 15% 150% 0.2250
Product/Technology – USP 15% 100% 0.1500
Competitive Environment 5% 75% 0.0375
Marketing/Sales/Partnerships 5% 80% 0.0400
Need for Additional Investment 5% 100% 0.0500
Other factors (e.g. grants received) 5% 100% 0.0500
Total 100% 1.1775
Average pre-revenue valuation EUR 1.5 m
Valuation of Target (pre-revenue) EUR 1.8 m

7. 7 | 12/02/2015
All approaches provide a great framework…
…in the end supply and demand for investment opportunities
drive the valuation
Startupinvestment
opportunities
Angelinvestors
(Deals) experience and
points of reference for
valuation
Industry knowledge
Angel network
Supply Demand

8. 8 | 12/02/2015
What is happening in startup markets?
The world talks about the big ones as this is more exciting
Source: Statista, Capital
IQ & i5invest Analysis
USD in bn
0 10 20 30 40 50
UBER
Airbnb
Dropbox
Xiaomi
Snapchat
Palantir
Jingdong
Rocket Internet
Pinterest
Zalando
Overview of most valuable start ups above
USD 1 billion
0
2
4
6
8
Latest pre-
money
valuation
Market Cap
(Jan 2015)
USDinbn
Rocket Internet
0
2
4
6
8
Latest pre-
money
valuation
Market Cap
(Jan 2015)
USDinbn
Zalando
0
10
20
30
40
Feb 2011 Aug 2013 Jun 2014 Dec 2014 Jan 2015
Pre-money(USDinbn)
UBER
….and their development over time
+141%

9. 9 | 12/02/2015
What is happening in transaction markets?
2/12/2015
Development of transaction multiples in
Internet Software
Source: Capital IQ & i5invest Analysis
0,0
5,0
10,0
15,0
0,0
20,0
40,0
60,0
80,0
100,0
Q1-2/FY2013 Q3-4/FY2013 Q1-2/FY2014 Q3-4/FY2014
Transactions in Europe - Internet Software
Average transaction value (EUR in m)
Transaction Value / EBITDA
0 1 000,0 2 000,0 3 000,0
Scout24 Holding GmbH - 2013
Host Europe WVS Limited - 2013
Civica plc - 2013
Nets Holding A/S - 2014
VKontakte Ltd. - 2014
Viber Media Inc. - 2014
Enterprise Value (USD in m)
Biggest Transactions
(USD in m)
Enterprise Value / EBITDA
Development of private placements in
Internet Software
0,0
100,0
200,0
300,0
400,0
500,0
0,0
2,0
4,0
6,0
8,0
10,0
Aug 2014 Sept 2014 Oct 2014 Nov 2014 Dec 2014
Private Placements - Internet Software
Average money raised (EUR in m)
Number of transactions
0
1
2
3
4
5
6
7
8
Europe and USA USA Europe
Private Placements per region - Internet
Software (money raised)
Q3 2014 Q4 2014
+20% +38%
-30%
(USD in m)
(USD in m)

10. 10 | 12/02/2015
What is happening in capital markets?
2/12/2015
66%
0,00
0,50
1,00
1,50
2,00
2,50
3,00
Europe USA
Enterprise Value / Sales - Jan 2015
Enterprise Value / Sales
How do capital markets look at
Internet Companies?
Source: Capital IQ & i5invest Analysis
US-based companies trade at a 66%
premium above their peers in Europe.
Companies in the Anglo-Saxon Region
trade at higher multiples in general.
Does being in the US add value for the sake
of being in the US?
0,00
1,00
2,00
3,00
4,00
5,00
6,00
-
2 000,0
4 000,0
6 000,0
8 000,0
10 000,0
United Internet AG
(DB:UTDI)
Yandex N.V.
(NasdaqGS:YNDX)
Telecity Group plc
(LSE:TCY)
Top 3 "European"
Enterprise Value EV / Revenues
0,00
5,00
10,00
15,00
20,00
-
50 000,0
100 000,0
150 000,0
200 000,0
250 000,0
300 000,0
350 000,0
Google Inc.
(NasdaqGS:GOOGL)
Facebook, Inc.
(NasdaqGS:FB)
eBay Inc.
(NasdaqGS:EBAY)
Top 3 American
Enterprise Value EV / Revenues
What are the big players and
their valuations?
USD in bn

11. 11 | 12/02/2015
Is there a bubble?
12/02/2015
Factors that should be considered when talking about a
bubble
Interest rates are
basically 0%
Total tech investments
incl. M&A close to 2000
Rising pre-money values
IPOs with negative
Earnings
Rising tech salaries
We are in Europe (with
still big global potential)
BUT: We need to improve the ecosystem and create
serial entrepreneurs with international exits
1
2
5
3
4
-
5 000,0
10 000,0
0
500
1000
Tech investments
Number of Deals
Investments (USD in m)
2
4
0
20
40
60
80
100
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
The percentage of IPOs
with negative earnings
3
0
20
40
60
80
100
Pre-Money Valuations
Later Round
Second Round
(USD in m)
5
86000
88000
90000
92000
94000
96000
98000
2009 2010 2011 2012 2013 2014
Software Engineer Base
Salary
(USD)
Source: i5invest analysis, PwC, DJ VentureSource, Jay R. Ritter / Business Insider and Glassdoor / BI.

12. 12 | 12/02/2015
Cluster Spengergasse
Spengergasse 37
1050 Vienna
In the heart of Vienna‘s startup ecosystem

13. 13 | 12/02/2015
What we do – Our Services
WE ARE LONG TERM PARTNERS (through all stages)
START-UP MENTORING
SEED FUNDING
CORPORATE DEVELOPMENT / M&A ADVISORY
We focus on max 2 new companies per year – we aren’t
spray & pray investors. We focus on sector expertise, mostly
strong IP/technology, international/US markets, rarely
copycat business models

14. 14 | 12/02/2015
Who we are – Our Team
Founded 2007, Vienna - partner i5growth Inc. in Palo Alto
12/02/2015
- PARTNERS & FRIENDS – OUR ECOSYSTEM-
Herwig Springer
CEO Corp. Dev.,
M&A
Patrick Prokesch
Director Corp. Dev.,
M&A
Paul Weinberger
Partner
Markus Wagner
Chairmain of the
Advisory Board
Alexander
Igelsboeck
Advisory Board
Martin Brunthaler
Advisory Board
Georg Novak
Executive Assistant
Bernhard Lehner
Partner
Vlad Gozman
Partner

15. 15 | 12/02/2015
Startup Mentoring and Seed Funding
Venture 1 Venture 2 Venture 3 Venture 4 Venture 5
Innovation Management and
Product Strategy
Go-to-Market Strategy
Company Setup and Office
Infrastructure
IT Dev. & Operations,
Accounting, Finance
Seed Funding, Business
Planning & Public Funding
HR & Recruiting
Marketing, PR & Media
Planning
Social Media Marketing and
SEO
Development
Project
Management
Product
Management
Development
Project
Management
Product
Management
Development
Project
Management
Product
Management
Development
Project
Management
Product
Management
Development
Project
Management
Product
Management
help ideas
to grow
?
International Business Network
Business development

16. 16 | 12/02/2015
Startup Incubation – Top 10 learnings
1
2
6
5
3
4
7
9
8
10
Team up with the best/team members you know/complementary people/experienced pros
Better a small piece of success than a huge of a failure
Don’t wait until your product is perfect but create a Minimum Viable Product
Talk-talk-talk about your company/products, no one will steal it
Sell-sell-sell generate revenues – revenue is the best funding ever!
Don’t rely on viral effects, PR or social media (SEO, CPA, …)
Launch fast, A/B testing, try out, learn, mutate, adopt
Look for experienced investors (execs, managers, experts, …)  expertise, money, network
Do it, don’t wait, don’t think about it, try it out
Build companies that earn money

17. 17 | 12/02/2015
Corporate Development / M&A Advisory
 Company and market
analysis
 Financial model and
business plan
 Indicative valuation
 Long- and shortlisting
of potential buyers
 Preparation of
transaction
documents (Info
Memo, Teaser & NDA)
 Contacting short list with
teaser and NDA
 Distribution of Info
Memo after receipt of
signed NDAs
 Preparation of
management
presentation
 Setup of Data Room
 Assessment of LOIs
 Selection of bidders
 SPA Negotiations with
preferred buyer(s)
 Development of final
transaction structure
(share/asset deal)
 Signing of SPA
 Receipt of approvals
 Closing
 Management
presentations and site
visits
 Coordinating Due
Diligence, expert
meetings and Q&A
session
 Assessment of Binding
Offers / Term Sheets
 Selection of preferred
buyer(s)
Phase 1
Preparation
Phase 2
Reach Out
Phase 3
Due Diligence
Phase 4
Negotiation
Key steps
Key success factors
 Understand dynamics
of transaction
environment
 Business
Development to
assure Fit for Exit
 Establish the right first
point of contact be it
business or corporate
development
 Create quickly
competitive process with
several potential bidders
 Negotiation tactics and
mitigating reps &
warranties
 Leverage different
stakeholders
 Bridging the value gap
 Comprehensive
preparation of
documents and
company data
 Fast, streamlined and
efficient due diligence
with several bidders
Efficient sell side support to maximize returns

18. 18 | 12/02/2015
Portfolio Overview
#inspire, #innovate, #incubate, #invest, #internationalize

19. Thank you!
OUR EUROPE OFFICE
i5invest Beratungs GmbH
(CEO Herwig Springer)
Spengergasse 37-39
A-1050 Vienna
Austria/Europe
OUR US PARTNER
i5growth Inc.
(CEO Markus Wagner)
460 S California Ave, #304
Palo Alto, California 94306
United States