This document outlines the calculations for valuing a startup company at different investment stages from seed to acquisition. It calculates:
1) The cash needed at each stage and resulting company valuations.
2) The internal rate of return (IRR) for investors at each stage, ranging from 41-52%.
3) The percentage ownership stakes for founders and investors at each stage.
The conclusion is that this is an attractive investment opportunity, with seed investors projected to receive a 52% IRR on their $2M investment over 5 years.
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AIM Global New Marketing plan presentation or the Ways to earn.
For the New Marketing plan presentation go here - http://www.aimworldsite.com/discussion/aim-global-new-marketing-plan
AIM Global New Marketing plan presentation or the Ways to earn.
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Dummy Cap Table & Returns Analysis - Round BLindsay Meyer
Example Pro Forma Cap Table for a Series B company (three tranches of A, plus warrants). Option pool refresh to post-money target of 10% fully diluted. Small reserve for licensor of technology.
Know Your Valuation for Equity Compensation (And Avoid the Perils of 409A)The Capital Network
If you are planning to offer anyone stock options - including employees and consultants - then you NEED to understand how to value your company correctly. If you run afoul of the 409A rules, you and your employees could have a very unpleasant tax surprise.
In this workshop, we will cover:
The difference between valuation for 409A and valuation for raising money
The difference between ISOs and non-ISOs
General valuation concepts and approaches that the IRS has outlined, especially as they apply to early-stage companies
If and when you need to engage an outside expert to assist with a valuation
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As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
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2. Seed Series A Series B M&A Cash
out
Value X RRC
Cash needed $2M $7M $50M
Valuation pre-money
Valuation post-money $200
M
Founders
Inv. seed
Inv. Series A
Inv. Series B
x1,5
9m + 3m
x2,5
21m + 3m
x2
24m
1. As a founders, we calculate the cash needed for the 5 next years before to be acquired
$2M + $7M + $50M = $159M
2. Today on TechCrunch, a similar company is acquired by a big corporation for $200M
3. Times: From Seed to Series A: 9months + 3months (finalizing next deal)
From Series A to Series B: 21months + 3months (finalizing next deal)
From Series B to M&A: 24months
4. IRR “Internal Rate of Returns” for the investors will be:
1. Investor 1 x1,5 in 1year ≈ 80%*
2. Investor 2 x2,5 in 2years ≈ 60%*
3. Investor 3 x2 in 2years ≈ 41%* *Look at the RRC table
3. Seed Series A Series B M&A Cash
out
Value X RRC
Cash needed $2M $7M $50M
Valuation pre-money
Valuation post-money $100M $200
M
Founders
Inv. seed
Inv. Series A
Inv. Series B
PREM&A = $200M $200M / 2 = $100M
x1,5
9m + 3m
x2,5
21m + 3m
X2
24m
4. Seed Series A Series B M&A Cash
out
Value X RRC
Cash needed $2M $7M $50M
Valuation pre-money $50M
Valuation post-money $20M $100M $200
M
Founders
Inv. seed
Inv. Series A
Inv. Series B
PREM&A = $200M $200M / 2 = $100M
PREB = $100M - $50M = $50M $50M / 2,5 = $20M
x1,5
9m + 3m
x2,5
21m + 3m
X2
24m
5. Seed Series A Series B M&A Cash
out
Value X RRC
Cash needed $2M $7M $50M
Valuation pre-money $6,6M $13M $50M
Valuation post-money $8,6M $20M $100M $200
M
Founders
Inv. seed
Inv. Series A
Inv. Series B
PREM&A = $200M $200M / 2 = $100M
PREB = $100M - $50M = $50M $50M / 2,5 = $20M
PREA = $20M - $7M = $13M $13M / 1,5 = $8,6M
PRESEED= $8,6M - $2M = $6,6M
x1,5
9m + 3m
x2,5
21m + 3m
X2
24m
6. Seed Series A Series B M&A Cash
out
Value X RRC
Cash needed $2M $7M $50M
Valuation pre-money $6,6M $13M $50M
Valuation post-money $8,6M $20M $100M $200
M
Founders 76,8%
Inv. seed 23,2%
Inv. Series A
Inv. Series B
PREM&A = $200M $200M / 2 = $100M
PREB = $100M - $50M = $50M $50M / 2,5 = $20M
PREA = $20M - $7M = $13M $13M / 1,5 = $8,6M
PRESEED= $8,6M - $2M = $6,6M
Seed %F= $2M / $8,6M = 23,2% - 100% = %S = 76,8%
x1,5
9m + 3m
x2,5
21m + 3m
X2
24m
7. Seed Series A Series B M&A Cash
out
Value X RRC
Cash needed $2M $7M $50M
Valuation pre-money $6,6M $13M $50M
Valuation post-money $8,6M $20M $100M $200
M
Founders 76,8% 49,92%
Inv. seed 23,2% 15,8%
Inv. Series A 35%
Inv. Series B
PREM&A = $200M $200M / 2 = $100M
PREB = $100M - $50M = $50M $50M / 2,5 = $20M
PREA = $20M - $7M = $13M $13M / 1,5 = $8,6M
PRESEED= $8,6M - $2M = $6,6M
Seed %F= $2M / $8,6M = 23,2% - 100% = %S = 76,8%
Series A %A = $7M / $20M = 35% - 100% = %F+S = 65%
%F= 65% * 76,8% = 49,92%; %S = 65% * 23,2% = 15,8%
x1,5
9m + 3m
x2,5
21m + 3m
X2
24m
8. Seed Series A Series B M&A Cash
out
Value X RRC
Cash needed $2M $7M $50M
Valuation pre-money $6,6M $13M $50M
Valuation post-money $8,6M $20M $100M $200
M
Founders 76,8% 49,92% 24,96%
Inv. seed 23,2% 15,8% 7,9%
Inv. Series A 35% 17,5%
Inv. Series B 50%
PREM&A = $200M $200M / 2 = $100M
PREB = $100M - $50M = $50M $50M / 2,5 = $20M
PREA = $20M - $7M = $13M $13M / 1,5 = $8,6M
PRESEED= $8,6M - $2M = $6,6M
Seed %F= $2M / $8,6M = 23,2% - 100% = %S = 76,8%
Series A %A = $7M / $20M = 35% - 100% = %F+S = 65%
Series B %B = $50M / $100M = 50% - 100% = %F+S=A = 50%
%F= 50% * 59,92% = 24,96%; %S = 50% * 15,8% = 7,9%
%A= 50% * 35% = 17,5%
x1,5
9m + 3m
x2,5
21m + 3m
X2
24m
%F= 65% * 76,8% = 49,92%; %S = 65% * 23,2% = 15,8%
10. Seed Series A Series B M&A Cash
out
Value X RRC
Cash needed $2M $7M $50M
Valuation pre-money $6,6M $13M $50M
Valuation post-money $8,6M $20M $100M $200
M
Founders 76,8% 49,92% 24,96% $49,9M
Inv. seed 23,2% 15,8% 7,9% $15,8M 7,9x 52%
Inv. Series A 35% 17,5% $35M 5x 50%
Inv. Series B 50% $100M 2x 41%PREM&A = $200M $200M / 2 = $100M
PREB = $100M - $50M = $50M $50M / 2,5 = $20M
PREA = $20M - $7M = $13M $13M / 1,5 = $8,6M
PRESEED= $8,6M - $2M = $6,6M
Seed %F= $2M / $8,6M = 23,2% - 100% = %S = 76,8%
Series A %A = $7M / $20M = 35% - 100% = %F+S = 65%
Series B %B = $50M / $100M = 50% - 100% = %F+S=A = 50%
x1,5
9m + 3m
x2,5
21m + 3m
x2
24m
Conclusion: This is a great deal! The proposal for the investors is:
Seed Investor: for $2M you’ll return $15,8M in 5 years = IRR 52% 7,9x
SeriesA Investor: for $7M you’ll return $35M in 4 years = IRR 50% 5x
SeriesB Investor: for $50M you’ll return $100M in 2 years = IRR 41% 2x
%F= 65% * 76,8% = 49,92%; %S = 65% * 23,2% = 15,8%
%F= 50% * 59,92% = 24,96%; %S = 50% * 15,8% = 7,9%
%A= 50% * 35% = 17,5%
11. Seed Series A Series B M&A Cash
out
Value X RRC
Capital needed $2M $7M $50M
Valuation pre-money $6,6M $13M $50M
Valuation post-money $8,6M $20M $100M $200
M
Founders 76,8% 49,92% 24,96% $49,9M
Inv. seed 23,2% 15,8% 7,9% $15,8M 7,9x 52%
Inv. Series A 35% 17,5% $35M 5x 50%
Inv. Series B 50% $100M 2x 41%
x1,5
9m + 3m
x2,5
21m + 3m
x2
24m
• Now you are a Seed investor trying to figure out you shares % in each series:
• You can invest $2M and expected return will be $12M in 5 years.
• What’ll be your % share en each round?
• M&A: $12M / $2M = x6 ≈ you will expect 43%*
• The expected value at M&A will be $300M -> $12M / $300M = I need to have 4% at the M&A
• I assume that my dilution at Series B will be 50%:
Shares at the M&A 4% / .50 = I need to have 8% before the Series B
• I assume that my dilution at Series A will be 35%:
Shares at the M&A 8% / .35 = I need to have 23% before the Series A
Conclusion: If you have 23% at the initial round for $2M you’ll receive $12M in 5 years. Deal!!
12.
13. Hope you enjoy it!
@BerkeleyExecEd
If you have any question do not hesitate to contact me: @RicardGarriga