June 18, 2014Efrat Kasznik, Founder & PresidentForesight Valuation Group, LLC

Startup Valuationfor Angel Investors

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About Me: Efrat Kasznik

Founder and President, Foresight Valuation Group, a Silicon-Valley based Intellectual property (IP) valuation, strategy and start-up advisory firm.

Valuation and strategy expert, with 20 years of experience analyzing IP portfolios across industries

Lecturer, Stanford Graduate School of Business

Chair, Cloud Committee, Licensing Executives Society (LES)

Top IP strategists, IAM 300 List 2013-2014 Co-founder, CFO and Advisor to startups and

incubators in the US and Europe, including: Stanford Venture Lab, The HUB Trieste, Astia Angel Fund

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The Startup Equity Valuation Timeline

Seed Fundin

g

Stock Option

s

Series A, B, C

M&AIPO

Available Information

Low High

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Angel Investment & Valuation

AngelInvest

?

PricedNot

Priced

Convertible

Note

NoFit

Preferred Stock

How to

Invest?

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Angel Funding: The Valuation “Triangle”

Funds Raised ($)

Ownership(%)

Valuation($)

< $1M

20%-40%$2.5M

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Angel Valuation Case Study:Floome Smartphone Breathalyzer

Customers

Production

Fulfillment

Financials

Team

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Three Valuation Methods

VC Valuation Approach

Adjusted Comparable Valuation Approach

Heuristic Approaches (experience based) Example - Dave McClure’s 5 Points

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$20 Million

$100 Million

$5Million

$2.5 Millio

n

5XExit Multiple

70-80%Discount Rate

= 20x ROI

Revenue in Year 5

Value in

Year 5

VC Valuation Approach:At Exit Point (Year 5)

Value Today

50% future dilution

Fully Dilute

d Value Today

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VC Valuation Approach:Industry Standard Discount Rates

• 80%+Seed

• 50-70%Angel 

• 40-60%Series A 

• 30-50%Series B 

• 25-35%Bridge

Sources: How Venture Capital Works , Harvard Business ReviewA Method for Valuing High-Risk Long-Term Investments, Harvard Business School

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Comparables Valuation Approach:Median/Mean Round Size

Source: Halo Report 2013

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Comparables Valuation Approach:Pre-Money Valuation Range

Source: Halo Report 2013

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Angel Valuation Considerations

Benchmarks

Company

Metrics

Your Investm

ent Objectiv

es

External

Factors

• Market Size• Partnerships• Regulation• Litigation• Funding & Exits

• Comparables• Future Trends

• Target ROI• Exit Horizon

• Team• Product• Execution (Beta)• IP portfolio

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The Dave McClure Five “Million Dollar Point” Approach*

Revealed by Dave McClure (500 Startups) at a TechCrunch Disrupt Event (2011)

Each “point” worth $1M:1. Market2. Product3. Team4. Customers5. Revenue

>> Maximum: $5 Million * Efrat’s 6th point: IP (patents)>> add another

$1M

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Angel Valuation Resources

Angel Resource Institute www.angelresourceinstitute.org

Fenwick & WestSeed Financing Survey 2012 of Internet/Digital Media and Software Industries

Silicon Valley Bank: The HALO Report 2013

Center for Venture Research https://paulcollege.unh.edu/cvr

THANK YOU!

Presentation available upon request

Efrat KasznikPresident, Foresight Valuation Groupekasznik@foresightvaluation.com650-561-3374http://www.linkedin.com/in/ekasznik