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Start-up Valuation Clinic Venture Capital Series   Roydean Osman, Vice President SEED Investment – CRADLE Fund Sdn. Bhd 17 th  April 2008 MSC Incubation Center, Multimedia University, Cyberjaya
Agenda  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Where we are ? – Funding ECO System  Growth  & Profit Funding Needs Point Zero Other Grants,  SME Loans &  Incubators, Government Incentives, Angels & Corp Investors Project Financiers, Commercial Banks, Venture Capitals,  Private Equity, Credit Guarantee Corporation, Leasing & Factoring Providers, Govt. Agencies Cradle Investment Programme Institutional & Foreign Investors, Public Funds, Merger & Acquisitions, Merchant Banks MDeC Maturity Expansion Production & Commercialisation Market Entry Production Enhancement New Markets Scaling & Expansion Commercial Success Pre IPO Listing & Go Global Design & Conceptualisation Idea Birth Product Prototype & Proof of Concept Seed Pre Seed Growth
Arts & Craft of Valuation (1)   ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Arts & Craft of Valuation (2)   ,[object Object],[object Object],[object Object],[object Object],[object Object]
Arts & Craft of Valuation (3)   ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Venture Capital Method
Valuation Methodologies  used by VCs (1)   Understanding the Venture Capital investment process Biz Plans  Kicks-In Products /Services Concepts/Ideas Analysis Entrepreneur  Analysis Business/  Venture Analysis Conditional Termsheet Approval Deal Sources Due Diligence Deal Terms Investment Decision Go/No-Go Screening Evaluation  Continues
Valuation Methodologies  used by VCs (2)   VC Cash Leadership (CEO) Implementation (CMO, CTO,  CFO) Idea Idea has limited value Ability to implement project  is most important What are you worth ?
Valuation Methodologies  used by VCs (3)   Cash Investment  :  $3 million Proposed Investor Share:  66.7% Post-Money Valuation  :  $ 4.5 million Pre-Money Valuation  :    $1.5 million Exit Valuation (Yr 5):  $30 million (PAT) Return to Investor (IRR): 46% Cash-on-Cash Return Investor 6.7x First hand valuation by VCs – expected Return on Investment
Valuation Methodologies  used by VCs (4)   Negotiation with VCs   $ Company Value VC Maximum Value Entrepreneur Minimum Value Negotiating Space
Valuation Methodologies  used by VCs (5)   Venture Capital Method (1)   ,[object Object],[object Object],[object Object],[object Object],If the terminal value of a company seeking seed/start-up capital is estimated to be $60 million and we assume the stage of the company is appropriate for investors to expect 30x ROI in year of harvest, then the post-money valuation of this company can be estimated at $2 million. If the required investment is $0.5 million, then the pre-money valuation would be $1.5 million.
Valuation Methodologies  used by VCs (5)   Venture Capital Method (2)   ,[object Object],[object Object],[object Object],[object Object],Required Investment Ownership (%)  =  Required  Total Terminal Value Ownership Required (%) New Shares  = 1 – Ownership Required x old shares
Valuation Methodologies  used by VCs (6)   Financial Engineering ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Analyzing an actual start-up  VCs Valuation Interactive – (1) ,[object Object],[object Object],[object Object],[object Object]
Analyzing an actual start-up  VCs Valuation Interactive – (2) ,[object Object]
Analyzing an actual start-up  VCs Valuation Interactive – (3) ,[object Object]
Closing ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Thank You ! [email_address]   [email_address]

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Valuation Clinic 17 Apr2008 Roydean

  • 1. Start-up Valuation Clinic Venture Capital Series Roydean Osman, Vice President SEED Investment – CRADLE Fund Sdn. Bhd 17 th April 2008 MSC Incubation Center, Multimedia University, Cyberjaya
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  • 3. Where we are ? – Funding ECO System Growth & Profit Funding Needs Point Zero Other Grants, SME Loans & Incubators, Government Incentives, Angels & Corp Investors Project Financiers, Commercial Banks, Venture Capitals, Private Equity, Credit Guarantee Corporation, Leasing & Factoring Providers, Govt. Agencies Cradle Investment Programme Institutional & Foreign Investors, Public Funds, Merger & Acquisitions, Merchant Banks MDeC Maturity Expansion Production & Commercialisation Market Entry Production Enhancement New Markets Scaling & Expansion Commercial Success Pre IPO Listing & Go Global Design & Conceptualisation Idea Birth Product Prototype & Proof of Concept Seed Pre Seed Growth
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  • 7. Valuation Methodologies used by VCs (1) Understanding the Venture Capital investment process Biz Plans Kicks-In Products /Services Concepts/Ideas Analysis Entrepreneur Analysis Business/ Venture Analysis Conditional Termsheet Approval Deal Sources Due Diligence Deal Terms Investment Decision Go/No-Go Screening Evaluation Continues
  • 8. Valuation Methodologies used by VCs (2) VC Cash Leadership (CEO) Implementation (CMO, CTO, CFO) Idea Idea has limited value Ability to implement project is most important What are you worth ?
  • 9. Valuation Methodologies used by VCs (3) Cash Investment : $3 million Proposed Investor Share: 66.7% Post-Money Valuation : $ 4.5 million Pre-Money Valuation : $1.5 million Exit Valuation (Yr 5): $30 million (PAT) Return to Investor (IRR): 46% Cash-on-Cash Return Investor 6.7x First hand valuation by VCs – expected Return on Investment
  • 10. Valuation Methodologies used by VCs (4) Negotiation with VCs $ Company Value VC Maximum Value Entrepreneur Minimum Value Negotiating Space
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  • 18. Thank You ! [email_address] [email_address]