Post on 19-May-2015
description
1
Ideas to Deals LiveValuation: What’s it all Worth?
2
• Valuation of early-stage companies is a little short of random.
• Valuation is negotiated, there are no hard numbers especially for early-stage companies.
• Provide a good projection of future value at a potential, future liquidity date and discount back.
• Know comparables…What other companies, similar to yours, have generated what multiples of sales at liquidity.
• Build value as you build the company ~ Focus on “Value Inflection Points”.
• Focus on dollars not percentage– 10% of a $20 million company is worth more than 100%
of a $1 million company.
Key Valuation Issues
3
Suggestions for CEO’s
• Know what investors look for and expect.• Make sure you and the investors are on the same
page. Good investors will want you to have a fair percentage of the company.
• Know why these things are important to investors.• Understand the factors that influence value• Anticipate investor questions.• Look at competitive deals.• Learn from the process ~ Listen well
4
Cap Table ExamplePre Investment
Unit Holders Issued Valuation Pre-investment Post-investment
John Doe 500k $500k 25% 19%Bill Smith 400k $400k 20% 15%Jane Brown 800k $800k 40% 31%
ESO Pool 300k $300k 15% 15% Note…ESO does not dilute Total Issued $2 mil $2 mil 100% 80%
Post Investment
Investors 500k $500k 0% 20%
Total Issued $2.5 mil $2.5 mil 25% 100%
5
“Cram Down” ExamplePre Investment
Unit Holders Issued Valuation Pre-investment Post-investmentJohn Doe 481,250 $240,625 19% 11.5%Bill Smith 381,250 $190,625 15% 9.5%Jane Brown 781,520 $390,625 31% 19%ESO Pool 375,000 $187,500 15% 15%Investors 481,250 $240,625 20% 11.5%
Total Issued $2.5 mil $1,250,000 100% 62.5%
Post Investment
Investors Rd 2 1,500,000 $1,250,000 0% 37.5%
Total Issued $4 mil $2.5 mil 100%$750,000 raised at $.50 per share; decrease in valuation of 50%