Download - Business Plan Preparation

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


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


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


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



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 ? ?



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



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



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



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 ? ?



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 ? ?



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 ? ?



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



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 ? ?



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



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



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 ? ?



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



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



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



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



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 ? ?



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 ?! ?!


Venture Capital Method Venture Capital Method Key AssumptionsKey Assumptions

Net ProfitNet Profit P/E MultipleP/E Multiple Investor IRRInvestor IRR

Download - Business Plan Preparation

Top Related