business plan preparation
DESCRIPTION
Business Plan Preparation. Frank Moyes Leeds School of Business University of Colorado Boulder, Colorado. Seed 80%+ Start-Up 60% Early Stage 50% Second Stage 40% Third Stage 30% Bridge 25%. 19x 10x 8x 5x 4x 3x. 0. Required Return on Investment. - PowerPoint PPT PresentationTRANSCRIPT
1Venture Capital Method of Valuation
Business Plan PreparationBusiness Plan Preparation
Frank MoyesFrank MoyesLeeds School of BusinessLeeds School of BusinessUniversity of ColoradoUniversity of ColoradoBoulder, ColoradoBoulder, Colorado
2Venture Capital Method of Valuation
Required Return on Required Return on InvestmentInvestment
SeedSeed 80%+ 80%+ Start-UpStart-Up
60%60% Early Stage 50%Early Stage 50% Second Stage 40%Second Stage 40% Third Stage 30%Third Stage 30% BridgeBridge
25%25%
IRR 5 yr.Increase
19x 19x 10x10x 8x8x 5x5x 4x4x 3x3x
Bygraves & Zacharakis
3Venture Capital Method of Valuation
Venture Capital Method Venture Capital Method Key AssumptionsKey Assumptions
Net ProfitNet Profit Valuation MultipleValuation Multiple
Price/EarningsPrice/Earnings Price/RevenuePrice/Revenue Price/EBITDAPrice/EBITDA Price/Seller’s Discretionary EarningsPrice/Seller’s Discretionary Earnings
Investor IRRInvestor IRR
4Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million
5Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value ? ?
6Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 million
7Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany ValueCompany Value $30 million$30 millionRequired IRRRequired IRR ? ?Required IncreaseRequired IncreaseRequired $ valueRequired $ value
8Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase ? ?Required $ valueRequired $ value
9Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value ? ?
10Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value $10 million$10 million% of company required% of company required ? ?
11Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation ? ?Post-money valuationPost-money valuation ? ?
12Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 millionExit yearExit year 5th year 5th yearRevenueRevenue $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 millionGrowth RateGrowth Rate 20% 20%P/E multipleP/E multiple 15x 15xCompany valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million$3 million
13Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x ? ?Company valueCompany value $30 million$30 million ? ?Required IRRRequired IRR 60% 60% ? ?Required Increase Required Increase 10x 10x ? ?Required $ valueRequired $ value $10 million$10 million ? ?% of company required% of company required 33% 33% ? ?Pre-money valuationPre-money valuation $2 million$2 million ? ?Post-money valuationPost-money valuation $3 million$3 million ? ?
14Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x 20x 20xCompany valueCompany value $30 million$30 million ? ?Required IRRRequired IRR 60% 60% ? ?Required Increase Required Increase 10x 10x ? ?Required $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million $3 million
15Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x 20x 20xCompany valueCompany value $30 million$30 million $40 million $40 millionRequired IRRRequired IRR 60% 60% ? ?Required Increase Required Increase 10x 10x ? ?Required $ valueRequired $ value $10 million$10 million ? ?% of company required% of company required 33% 33% ? ?Pre-money valuationPre-money valuation $2 million$2 million Post-money valuationPost-money valuation $3 million$3 million
16Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x 20x 20xCompany valueCompany value $30 million$30 million $40 million $40 millionRequired IRRRequired IRR 60% 60% 60% 60%Required Increase Required Increase 10x 10x 10x 10xRequired $ valueRequired $ value $10 million$10 million $10 million$10 million% of company required% of company required 33% 33% 25% 25%Pre-money valuationPre-money valuation $2 million$2 million ? ?Post-money valuationPost-money valuation $3 million$3 million ? ?
17Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $ 2 million$ 2 millionGrowth RateGrowth Rate 20% 20% 30% 30%P/E multipleP/E multiple 15x 15x 20x 20xCompany valueCompany value $30 million$30 million $40 million $40 millionRequired IRRRequired IRR 60% 60% 60% 60%Required Increase Required Increase 10x 10x 10x 10xRequired $ valueRequired $ value $10 million$10 million $10 million$10 million% of company required% of company required 33% 33% 25% 25%Pre-money valuationPre-money valuation $2 million$2 million $3 million $3 millionPost-money valuationPost-money valuation $3 million$3 million $4 million $4 million
18Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x ? ?Company valueCompany value $30 million$30 millionRequired IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10x Required $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million$3 million
19Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x 10x 10xCompany valueCompany value $30 million$30 million ? ?Required IRRRequired IRR 60% 60%Required Increase Required Increase 10x 10xRequired $ valueRequired $ value $10 million$10 million% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million$3 million
20Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x 10x 10xCompany valueCompany value $30 million$30 million $10 million $10 millionRequired IRRRequired IRR 60% 60% ? ?Required Increase Required Increase 10x 10x ? ?Required $ valueRequired $ value $10 million$10 million ? ?% of company required% of company required 33% 33%Pre-money valuationPre-money valuation $2 million$2 millionPost-money valuationPost-money valuation $3 million$3 million
21Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x 10x 10xCompany valueCompany value $30 million$30 million $10 million $10 millionRequired IRRRequired IRR 60% 60% 60% 60%Required Increase Required Increase 10x 10x 10x 10xRequired $ valueRequired $ value $10 million$10 million $10 million $10 million% of company required% of company required 33% 33% ? ?Pre-money valuationPre-money valuation $2 million$2 million ? ?Post-money valuationPost-money valuation $3 million$3 million ? ?
22Venture Capital Method of Valuation
Venture Capital MethodVenture Capital MethodMountain UnicyclesMountain Unicycles
InvestmentInvestment $1 million$1 million $1 million$1 millionExit yearExit year 5th year 5th year 5th year5th yearRevenueRevenue $20 million$20 million $20 million$20 millionNet profit (10%)Net profit (10%) $2 million$2 million $1 million$1 millionGrowth RateGrowth Rate 20% 20% 10% 10%P/E multipleP/E multiple 15x 15x 10x 10xCompany valueCompany value $30 million$30 million $10 million $10 millionRequired IRRRequired IRR 60% 60% 60% 60%Required Increase Required Increase 10x 10x 10x 10xRequired $ valueRequired $ value $10 million$10 million $10 million $10 million% of company required% of company required 33% 33% 100% 100%Pre-money valuationPre-money valuation $2 million$2 million ?! ?!Post-money valuationPost-money valuation $3 million$3 million ?! ?!
23Venture Capital Method of Valuation
Venture Capital Method Venture Capital Method Key AssumptionsKey Assumptions
Net ProfitNet Profit P/E MultipleP/E Multiple Investor IRRInvestor IRR