Presentation by Schwartz Heslin Group, Inc. (SHG)

Business Valuation: Startup Companies

Valuation specialists typically use historical financial data to extrapolate the future value of a business But startup companies have short

operational histories and little historical financial data

Startups vs. Mature Companies

Startups require a more creative valuation methodology that considers, among other factors: Quality of management Value of comparable companies Industry prospects Value of company IP Stage of development Working capital requirements

Startup Valuation

The quality of a startup company’s management team is examined for: Past performance Skill level Experience

An experienced and well-educated management team can significantly bolster a startup’s value

Management Team

Comparable companies Valuation experts examine the value of

similar companies as benchmarks Industry prospects

Startups in expanding market spaces are generally valued at higher multiples than those in stagnant or shrinking spaces

External Factors

A startup’s IP can often be its most valuable form of asset Valuable IP can be crucial to giving a

startup a competitive advantage Potential buyers look for valuable IP that

can be deployed in new areas or can form the basis of a new service or product

Company Intellectual Property

A more mature company will be valued at higher multiples than a less mature one A young startup is often considered to

have: A less stable and consistent customer base A less established or well-known brand An unproven product or service

Stage of Development (1)

Potential buyers will often look for certain development benchmarks as signs of a maturing enterprise How close is the company to breaking even

or becoming profitable? Is the company generating positive cash

flow?

Stage of Development (2)

In general, a startup with greater or expanding working capital requirements is not as valuable as one with smaller working capital needs

Short-term liquidity needs soak up available funds if less liquidity is needed, investment in the

startup is less risky and more attractive for the investor

Working Capital Requirements

Startups are valued at lower multiples than mature companies for a number of reasons These reasons warrant a more creative

approach to business valuation This also creates greater variance in

professional valuations Startup owners should take steps to

bolster enterprise value in advance of exit opportunities

Conclusion

Presented by:

Schwartz Heslin Group

Web: www.shggroup.com

Phone: 518-586-7733

Address: 8 Airport Park

Bvld.Latham, NY 12110

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