Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
1
Definition of Start-up
• There's no definition any two
entrepreneurs or investors agree on.
2
What is Fund Raising
• Fundraising is much
more than asking
investors for money
• Financial Support
• Non- financial
supports
3
New Venture Funding Stream
$ IPO
Venture Capital Rounds
Financing to Milestones Cash
Sales Flow
Time
4
Valley of Death
5
Financing Options
The bad way (Conditional). Debt
The hard way. Equity
The really hard way. Bootstrapping
6
Determine How Much You are Raising
• Burn rate
• Overestimation
• Underestimation
7
Fundraising Materials
• Executive summary
• Short description of the business (elevator pitch)
• Presentation
• Business plan
• Detailed financial model
• The assumptions underlying the revenue forecast
• The monthly burn rate or cash consumption of the
business
8
Output of the Business Planning
Process
• Business plan (narrative)
• Financial statements
• PowerPoint pitch (12-13 pages)
• Elevator pitch (1-2 minutes)
9
Due Diligence Materials
• Technical due diligence
• Business due diligence
• Market analysis
• Cap table
• Valuation
• Term sheet
• (www.venturedeals.com/resources)
10
Common Deck Mistakes
• Too many slides, too much information
• Too many product details, or too many
financial details
• Belittling competitors
• False/silly assumptions you can’t back
up or don’t have data on
• False confidence or arrogance
11
How VCs Decide to Invest
• All VCs are different
• Investment strategy
• They need five-year detailed financial
projection
12
Fundraising Process
Investor Final
Presentations Documentation
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
13
Using Multiple VCs to Create
Competition
• Choice is power
• Time is a critical factor
• Most VCs have a slow processes
14
Closing the Deal
• Closing the deal includes two activities:
• Signing of the term-sheet
• Signing the definitive documents and getting
the cash
15
Definition of VC
• The term “venture capital” is typically
associated with high-risk, high-growth
potential start-ups that may depending on a
number of external factors.
• Any investment in a start-up, can be called a
venture capital investment, though a
common hallmark of venture capital
investors is that with their investment they
obtain some level of influence over the
company in which they invest.
16
Nature of the Growth
• Demand in your industry is
constantly outstripping the
supply !
• You wish to have growth in
multiples and not in
percentages
• You believe that your service /
product can achieve the
exponential growth and you
have the right strategies in
place!
17
Why Venture Capital?
• Bank saying NO to loans
and seed funding !!
• You have a new concept
and friends and family do
not believe the potential !!
They say NO !
• You have limited capital
after initial stage – for
achieving growth
18
Examples…
19
VC Structure
Venture Capital Entrepreneurs
Institutional Firm (GP)
Startups
Investor (LP)
Liquidity Event
(Sale or IPO)
Carried Interest
20
VC Stages
21
VC Satges
22
VC Funnel
Fund Size
M&A/IPO
$20M High Risk ICO
Venture
Capitals
$5M
Angels
$2M
Time-Line
25
Types of Venture Capital Firms
• Micro VC fund
• Seed-stage funds
• Early-stage funds
• Mid-stage funds
• Late-stage funds
26
Venture Capital Structure
LP 3 GP
LP 1 2%
LP 4
LP 2
$100 Management Fee
Portfolio
$9.8 $9.8 Portfolio
Company 2 Company 9
$9.8 $9.8
Portfolio Portfolio
Company 3 Company 8
$9.8 $9.8
Portfolio $9.8 $9.8 Portfolio
Company 4 Company 7
Portfolio Portfolio
Company 5 Company 6 27
Venture Capital Return
LP 3 GP
LP 1
LP 4
LP 2
$180 $20
Portfolio
$100 $35 Portfolio
Company 2 Company 9
Portfolio Portfolio
Company 8
Company 3
$40
Portfolio $25 Portfolio
Company 4 Company 7
Portfolio Portfolio
Company 5 Company 6 28
29
Startup Valuation
• What is the difference
between Pricing &
Valuation?
• Company valuation vs.
startup valuation
30
Principles of Startups’ Valuation
• The book value of a startup is close to zero
• The valuation is different for different
proposes (fundraising or equity buying)
• Undervalue is not healthy
• Overvalue is not healthy either
• Over-fundraising is not healthy
• From pure communism to pure capitalism
31
Buying Equity vs. Fundraising
• Investors become shareholder in two
ways:
• Buying equity: You buy some amount of
shares from current shareholder, and money
goes to his pocket.
• Fundraising: New shares will be issued, and
money goes to company account.
32
Dilution Example
33
Low valuation Example
Year 1 2 3
Cash need T1B T3B T10B
Valuation (pre money) T4B T12B T40B
Low Valuation (75%) T3B T9B T30B
Cap table in healthy Founders: 80% Founders: 64% Founders: 51.2%
VC1: 20% VC1:16% VC1:12.8%
valuation VC2: 20% VC2: 16%
VC3: 20%
Cap table in low Founders: 75% Founders: 60% Founders: 45%
VC1:25% VC1:15% VC1:11.25%
valuation VC2: 25% VC2: 18.75%
VC3: 25%
34
Valuation Methods
• Asset based methods:
• Cost to duplicate
• Cash flow based methods:
• DCF
• Relative methods:
• Analytical benchmark
• Multiples (Revenue, EBIDTA)
• Intuitive and heuristic methods:
• Scorecard
• Other methods:
• VC Method
• Dave Berkus Method
• ...
35
Methods Application in Different Stages
of Developments
Source: AD4Ventures 36
Definition of WACC
37
Discounted Cash Flows
• Calculating the Enterprise Value (EV) as the
present value of future cash flows
• Discount rate (WACC) which will be higher
regarding the uncertainty of the risk profile
• It needs a rich set of data-points:
• Sales, Users, Costs, etc. that is realized
• Financial projections with plausible assumptions
38
DCF Method
• Valuation from DCF method consists of three
elements:
• +All profits in short term (usually 3-10 years)
• estimated with financial projection table
• + Plus all profits for long-term (for years after short
period to ∞)
• it’s a geometric series based on last year profit and
fundamental growth rate
• - Minus all fund raising
• Valuation = Short term Profit + Long term profit – fund
raising
39
Failure rate of startups in different
stages
Proof of
Team MVP
Concept
Scale Monetization
40
DCF Method
Investors:
• Average of upper bound interest rate used: 67.5%
• Average of lower bound interest rate used: 39.5%
Startups:
• Startups said interest rate used for their valuation was 57%
41
Multiple Method
• Indication of EV based on trading prices
(stock market or M&A transaction prices)
• It is very similar to P/E and EBITDA
multiples.
• What to compare?
• Sale/GMV (Gross Merchandise Value)
• Revenue: Your real earning; your commission.
• EBITDA
• Earnings (net profit)
42
How to find Revenue and Profit
multiples
• How to find Revenue and Profit multiples:
• We have a data from public company (from tsetmc.com) :
• 200M number of shares
• Price: T1200 per share
• Market cap: T240B
• Adjustments: Valuation = Market cap – Physical capital +
Debt – Payables ≈ T170b
• Also we know (from codal.ir):
• Revenue= T20b - EBITDA= T10b
• So: Valuation / Revenue = 170/ 20 = 8.5
• Valuation / EBITDA = 170/10 = 17
43
44
EBITDA Multiples Valuation
Source: AD4Ventures 45
EV/R Multiple
46
Case: online taxi service
• Assumptions:
• Market Size: 200 K
• Market Share: 50%
• Average Ride/Day: 5
• Average Fare: T15K
• Commission: 13%
47
Valuation (Multiple method)
• Growth assumptions:
• Drivers right now: 30K
• Drivers @ 2 years: 80k
• Revenue = number of drivers* ride/day * fare
* commission * number of days in year
Revenue
• 80,000 * 5 * 15,000 * 13% * 365 = T284.7b
48
Valuation (Multiple method)
• Valuation (from revenue multiple) =
(𝑅𝑒𝑣𝑒𝑛𝑢𝑒 ∗𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑒)/ (1+𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑟𝑎𝑡𝑒)^𝑛
• Valuation = 284.7 * 2.65 / (1 + 0.5) ^2 =
T335.3b
• Valuation (from profit multiple) = (𝐸𝐵𝐼𝑇𝐷𝐴
∗𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑒) /(1+𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒)^𝑛
• Valuation = 284.7 * 40% * 13.5 / (1 + 0.5) ^2
= T683.2b
49
Exit Strategy
• Young founders are often surprised that investors
expect them either to sell the company or go public.
• Investors need to get their capital back
• Exit Types
• M&A (Mergers & Acquisitions)
• IPO (Initial Public Offering)
• ICO (Initial Coin Offering)
• Sell to a friendly individual
• SME
• Liquidation and close
50
Term Sheet
• Price
• Liquidation Preference
• Pay-to-Play
• Vesting
• Exercise Period
• Employee Pool
• Anti-dilution
51