The summary of how startups get fundraising and how to measure their valuation. This file demonstrates the methods and procedures of startup valuation.

1. Startup Valuation
Methods and Procedures
Vahid Fakhr
VentureCapitalist
2021

2. Vahid Fakhr
❖ MBA Graduated
❖ Venture Capital Principal at Lotus Investment Bank
❖ Previous Program manager OF TAC Accelerator
❖ Startup & VCs Fundraising Consultant
❖ The lean product playbook By Dan Olsen (Translate)
❖ Secretes of Sandhill Road By Scut Kupor (Translate)
Introduction

3. Startup Phases
Development Fundraising

4. Fundraising models
➢ Bootstrapping your business
➢ winning contests
➢ Friends and Family
➢ Crowdfunding
➢ Incubators and Accelerators
➢ Angel investor
➢ Bank Loan
➢ Non-Banking Financial Corporations (NBFCs)
➢ Venture Capital

5. The Best Choice?!
Advantages of VC funding
➢Debt FREE!
➢Experts
➢New Markets and Investors
➢Trustworthy
➢key management skills
➢VC portfolio
➢Real Value!
➢The Exit (Method?)
Disadvantages?!

6. ➢ Loan or debt-based
fundraising
➢ Royalty Financing
➢ Convertible Debt or
Convertible Note
➢ Equity
VCs Fundraising Types

7. ImportantFactorsfor
Valuation
1-Team
2-Market Size (PAM, TAM, SAM, SOM)
3-Benchmark
4-Business Model (Specially Revenue Model)
5-Cash Need & Burn Rate
6-Historical Data (Growth & KPIs)
7-Financial Projection (Startup’s Bible)
8-StartupAge & Time to Maturity
9- Competition and maturity of market
10- Sum of above= Risk!
11-ETC.

8. Valuation Consideration
■ Definition of “startup” when we talk about “valuation for
startups”
■ Value = monetary estimate of the benefit from owning an
asset or the right to exploit an asset
■ Stock purchase vs. fundraise
■ Value lies in the eyes of the beholder
■ Valuation across business life cycle
■ Industry-specific valuation
■ More of an art than a science (is a systematic, disciplined
approach, not a science)
■ Overvaluation / Undervaluation
■ Post-money / Pre-money valuation
■ Discount Rate= DR
■ What is valuation in real?

9. Startup Valuation Methods
Time to Maturity
First Chicago

10. Valuation Variance
Value
Growth

11. Income Statement (P& L)
-Ratios= Profit Margin, EBIT
& EBITDA Margin
Revenue & Expense Growth,
Revenue/Each Cost …
-Working Capital
-FCF= Free Cash Flow
-Differences Between FCF &
Net Income
-….

12. Multiple Methode
■ EV / GMV
■ EV / S
■ EV / R
■ EV / EBITDA
■ EV / E
■ EV = Enterprise Value = Market Cap – Cash + Debt
■ EV = Market Cap – Cash – Short-term investment
– Assets held for sale – Long term financial assets +
Short-term financial debt + Long-term financial debt
EV REVENUE EV/REVENUE
Company 2018 2019 TTM NTM
Booking Holding 81.57 14.44 15.29 5.65 5.33
Expedia Holding 19.94 9.26 9.9 2.15 2.01
Ctrip 18.63 4.5 5.35 4.14 3.48
MakeMyTrip 2.09 0.486 0.659 4.30 3.17
Travelzoo 0.198 0.111 0.118 1.78 1.68
TripAdvisor 5.65 1.61 1.69 3.51 3.34
trivago 1.29 0.914 0.966 1.41 1.34
Despegar 0.567 0.53 0.522 1.07 1.09
Yatra 0.183 0.112 0.0731 1.63 2.50
AVERAGE 2.85 2.66
MEDIAN 2.15 2.50

13. Multiple Method
IN NTM & LTM
Post-Money Valuation = EV/X(Market Multiple Rate) *(1- DLOM)*X’(Actual Value of X in startup)
EV/R=3 , Startup Revenue LTM= 100,Dlom=25%, Pre-Money Valuation= 3*100*(1-0.25)=225
IN Projection
Post-Money Valuation = (EV/X(Market Multiple Rate) *(1- DLOM)*X’(Actual Value of X in startup))/(1+DR)^Maturity Year
EV/R=3 , Startup Revenue In Year 5= 500,Dlom=25%, DR=60%, Pre-Money Valuation= 3*500*(1-0.25) /(1+0.6)^5= 107

14. DCF (Discounted Cash Flows)Method

15. Terminal Value
WACC= TERMINAL DR
G= Fundamental Growth
YEAR 1 2 3 4 5 N
DR 90% 75% 65% 60% 55% 45%

16. Sources
THELEANPRODUCTPLA
YBOOK
DanOlsen
SECRETSOFSANDHILLROAD
SCOTTKUPOR
THEDARKSIDEofVALUATION
ASWATHDAMODARAN
VentureDeals
BradFeld,JasonMendelson

17. Thank You
Vahid Fakhr LinkedIn
VahidFakhr@Gmail.com
VahidF24
ForFiles,Booksandotherusefuldata
@investingfund