Transcript Business Plan Preparation Frank Moyes Leeds School of Business University of Colorado

Business Plan Preparation
Frank Moyes
Leeds School of Business
University of Colorado
Boulder, Colorado
Venture Capital Method of Valuation
1
Required Return on
Investment
IRR
 Seed
80%+
 Start-Up
60%
 Early Stage
50%
 Second Stage 40%
 Third Stage
30%
 Bridge
25%
5 yr.
Increase
 19x
 10x
 8x
 5x
 4x
 3x
Bygraves & Zacharakis
Venture Capital Method of Valuation
2
Venture Capital Method
Key Assumptions
Net Profit
Valuation Multiple
Price/Earnings
Price/Revenue
Price/EBITDA
Price/Seller’s Discretionary Earnings
Investor IRR
Venture Capital Method of Valuation
3
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
4
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
?
5
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
6
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company Value
Required IRR
Required Increase
Required $ value
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
?
7
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
?
8
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
?
9
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
?
10
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
?
?
11
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
12
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$ 2 million
30%
?
?
?
?
?
?
?
?
13
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$ 2 million
30%
20x
?
?
?
14
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$ 2 million
30%
20x
$40 million
?
?
?
?
15
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$ 2 million
30%
20x
$40 million
60%
10x
$10 million
25%
?
?
16
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$ 2 million
30%
20x
$40 million
60%
10x
$10 million
25%
$3 million
$4 million
17
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$1 million
10%
?
18
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$1 million
10%
10x
?
19
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$1 million
10%
10x
$10 million
?
?
?
20
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$1 million
10%
10x
$10 million
60%
10x
$10 million
?
?
?
21
Venture Capital Method
Mountain Unicycles
Investment
Exit year
Revenue
Net profit (10%)
Growth Rate
P/E multiple
Company value
Required IRR
Required Increase
Required $ value
% of company required
Pre-money valuation
Post-money valuation
Venture Capital Method of Valuation
$1 million
5th year
$20 million
$2 million
20%
15x
$30 million
60%
10x
$10 million
33%
$2 million
$3 million
$1 million
5th year
$20 million
$1 million
10%
10x
$10 million
60%
10x
$10 million
100%
?!
?!
22
Venture Capital Method
Key Assumptions
Net Profit
P/E Multiple
Investor IRR
Venture Capital Method of Valuation
23