Business Plan Preparation Frank Moyes College of Business and Administration University of Colorado Boulder, Colorado Venture Capital Method of Valuation

Required Return on Investment Required Return on Investment 5 yr. Increase ROI Seed 80%+ Start-Up 60% Early Stage 50% Second Stage 40% Third Stage 30% Bridge 25% 19x 10x 8x 5x 4x 3x Seed: proof of concept Start-up: set-up production and initial sales Early stage: full scale operations and market development Second stage: expansion Exit: harvest CCG Seed prototype show to customeres investors: #250K + #50K business plan got oreder for 6 systems Start-up site in Cambridge 2,000sq ft ordered materials and parts 5 people Sales Director cashed check Early 2 sites same business park 5,000 sq ft distributor Europe CFO High margins 60%+ lose control Second stage new location 20,000 sq ft 45 people to 75 Marketing Director bank loans offices in Paris and Frankfurt US market Exit partner Carlton for US #12 million Bygraves & Zacharakis Venture Capital Method of Valuation

Venture Capital Method Key Assumptions Net Profit Valuation Multiple Price/Earnings Price/Revenue Price/EBITDA Price/Seller’s Discretionary Earnings Investor ROI Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million Exit year 5th year Revenue $20 million Net profit (10%) $2 million Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million Exit year 5th year Revenue $20 million Net profit (10%) $2 million Growth Rate 20% P/E multiple 15x Company value ? Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million Exit year 5th year Revenue $20 million Net profit (10%) $2 million Growth Rate 20% P/E multiple 15x Company value $30 million Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million Exit year 5th year Revenue $20 million Net profit (10%) $2 million Growth Rate 20% P/E multiple 15x Equity value $30 million Required ROI ? Required Increase Required $ value Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million Exit year 5th year Revenue $20 million Net profit (10%) $2 million Growth Rate 20% P/E multiple 15x Company value $30 million Required ROI 60% Required Increase ? Required $ value Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million Exit year 5th year Revenue $20 million Net profit (10%) $2 million Growth Rate 20% P/E multiple 15x Company value $30 million Required ROI 60% Required Increase 10x Required $ value ? Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million Exit year 5th year Revenue $20 million Net profit (10%) $2 million Growth Rate 20% P/E multiple 15x Company value $30 million Required ROI 60% Required Increase 10x Required $ value $10 million % of company required ? Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million Exit year 5th year Revenue $20 million Net profit (10%) $2 million Growth Rate 20% P/E multiple 15x Company value $30 million Required ROI 60% Required Increase 10x Required $ value $10 million % of company required 33% Pre-money valuation ? Post-money valuation ? Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million Exit year 5th year Revenue $20 million Net profit (10%) $2 million Growth Rate 20% P/E multiple 15x Company value $30 million Required ROI 60% Required Increase 10x Required $ value $10 million % of company required 33% Pre-money valuation $2 million Post-money valuation $3 million Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $ 2 million Growth Rate 20% 30% P/E multiple 15x ? Company value $30 million ? Required ROI 60% ? Required Increase 10x ? Required $ value $10 million ? % of company required 33% ? Pre-money valuation $2 million ? Post-money valuation $3 million ? Info on valuations Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $ 2 million Growth Rate 20% 30% P/E multiple 15x 20x Company value $30 million ? Required ROI 60% ? Required Increase 10x ? Required $ value $10 million % of company required 33% Pre-money valuation $2 million Post-money valuation $3 million Info on valuations Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $ 2 million Growth Rate 20% 30% P/E multiple 15x 20x Company value $30 million $40 million Required ROI 60% 60% Required Increase 10x 10x Required $ value $10 million ? % of company required 33% ? Pre-money valuation $2 million ? Post-money valuation $3 million ? Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $ 2 million Growth Rate 20% 30% P/E multiple 15x 20x Company value $30 million $40 million Required ROI 60% 60% Required Increase 10x 10x Required $ value $10 million $10 million % of company required 33% 25% Pre-money valuation $2 million ? Post-money valuation $3 million ? Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $ 2 million Growth Rate 20% 30% P/E multiple 15x 20x Company value $30 million $40 million Required ROI 60% 60% Required Increase 10x 10x Required $ value $10 million $10 million % of company required 33% 25% Pre-money valuation $2 million $3 million Post-money valuation $3 million $4 million Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $1 million Growth Rate 20% 10% P/E multiple 15x ? Company value $30 million Required ROI 60% Required Increase 10x Required $ value $10 million % of company required 33% Pre-money valuation $2 million Post-money valuation $3 million Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $1 million Growth Rate 20% 10% P/E multiple 15x 10x Company value $30 million ? Required ROI 60% Required Increase 10x Required $ value $10 million % of company required 33% Pre-money valuation $2 million Post-money valuation $3 million Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $1 million Growth Rate 20% 10% P/E multiple 15x 10x Company value $30 million $10 million Required ROI 60% ? Required Increase 10x ? Required $ value $10 million ? % of company required 33% Pre-money valuation $2 million Post-money valuation $3 million Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $1 million Growth Rate 20% 10% P/E multiple 15x 10x Company value $30 million $10 million Required ROI 60% 60% Required Increase 10x 10x Required $ value $10 million $10 million % of company required 33% ? Pre-money valuation $2 million ? Post-money valuation $3 million ? Venture Capital Method of Valuation

Venture Capital Method Mountain Unicycles Investment $1 million $1 million Exit year 5th year 5th year Revenue $20 million $20 million Net profit (10%) $2 million $1 million Growth Rate 20% 10% P/E multiple 15x 10x Company value $30 million $10 million Required ROI 60% 60% Required Increase 10x 10x Required $ value $10 million $10 million % of company required 33% 100% Pre-money valuation $2 million ?! Post-money valuation $3 million ?! Venture Capital Method of Valuation

Venture Capital Method Key Assumptions Net Profit P/E Multiple Investor ROI Venture Capital Method of Valuation