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

2. Required Return on Investment
Required Return on Investment
5 yr.
Increase
ROI
Seed %+
Start-Up %
Early Stage %
Second Stage 40%
Third Stage %
Bridge %
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

3. 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

4. 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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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