Startup Valuation for Angel Investors
15
June 18, 2014 Efrat Kasznik, Founder & President Foresight Valuation Group, LLC Startup Valuation for Angel Investors
-
date post
17-Oct-2014 -
Category
Business
-
view
688 -
download
3
description
The Startup Equity Valuation Timeline Angel Investment & Valuation Angel Funding: The Valuation “Triangle” Three Valuation Methods VC Valuation Approach: Industry Standard Discount Rates Comparables Valuation Approach: Median/Mean Round Size Comparables Valuation Approach: Pre-Money Valuation Range Angel Valuation Considerations The Dave McClure Five “Million Dollar Point” Approach*
Transcript of Startup Valuation for Angel Investors
June 18, 2014Efrat Kasznik, Founder & PresidentForesight Valuation Group, LLC
Startup Valuationfor Angel Investors
2Foresight Valuation Group © 2014
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
3Foresight Valuation Group © 2014
The Startup Equity Valuation Timeline
Seed Fundin
g
Stock Option
s
Series A, B, C
M&AIPO
Available Information
Low High
4Foresight Valuation Group © 2014
Angel Investment & Valuation
AngelInvest
?
PricedNot
Priced
Convertible
Note
NoFit
Preferred Stock
How to
Invest?
5Foresight Valuation Group © 2014
Angel Funding: The Valuation “Triangle”
Funds Raised ($)
Ownership(%)
Valuation($)
< $1M
20%-40%$2.5M
6Foresight Valuation Group © 2014
Angel Valuation Case Study:Floome Smartphone Breathalyzer
Customers
Production
Fulfillment
Financials
Team
7Foresight Valuation Group © 2014
Three Valuation Methods
VC Valuation Approach
Adjusted Comparable Valuation Approach
Heuristic Approaches (experience based) Example - Dave McClure’s 5 Points
8Foresight Valuation Group © 2014
$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
9Foresight Valuation Group © 2014
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
10Foresight Valuation Group © 2014
Comparables Valuation Approach:Median/Mean Round Size
Source: Halo Report 2013
11Foresight Valuation Group © 2014
Comparables Valuation Approach:Pre-Money Valuation Range
Source: Halo Report 2013
12Foresight Valuation Group © 2014
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
13Foresight Valuation Group © 2014
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
14Foresight Valuation Group © 2014
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 [email protected]://www.linkedin.com/in/ekasznik
