Venture2014 epfl financing

www.venture.ch Commission for Technologyand Innovation CTI

Financing in the startup phase

Claude Florin, A3 Angels

V.2


Outline

Start Up Stages and Financing Requirements Business Angels and Venture Capital Company Valuation Equity Share, Dilution & Exiting Getting started


Entrepreneurs and investors perspectives

Start Up and Funding Stages

| 2


Funding sources

Grants Crowd funding

Business Angels

Venture Capital

Banks Rev

enue

/ E

BIT

DA

BA network syndication

> CHF 50M/year in CH Source: EBAN, BBAA NESTA-BBAA “Siding with the Angels”- 2009

> CHF 100M/year in CH


What Type is your Start-up ?

Adapted from Newwork LLC

4

Annu

al Sa

les

CHF1M

CHF10M

CHF50M

CHF500M

CHF100M

CHF5M

CHF1 B

Acquisition

Venture capital

Strategic partner

Business Angels

Grants

FFF

Bootstrap

Self-funded

“Investable” business Born to be big Born to Flip Driven to make a

difference

“Life-style” business Work to feed the family Work to live their

passion Social startups


Funding stages and amounts

Adapted from Neworks, LLC; Startup Genome, Silicon Valley investments

5

Pre-Seed Seed Startup Efficiency

Self-funded 10-50k

Bootstrap Alternative product 30-60% margins

FFF 50-150k

Grants 100k, 300k +

Angel 50-150k

Strategic partner 0.5 – 10 M+

Venture capital Special funds

1M, 5M+

Acquisition Testing required

10-50 M+

Banks x % assets + y % A/R

0.5M

0

3000

6000

9000

VC funding $M

Investment (CHF)


Business Angels and Venture Capital

| 7


Early-stage investment motivation

Institutional investors VCs : return on investment to investors Corporate VCs : strategic business development Business Angels : Return on Investment is the metric Staying involved (sense of usefulness) Give back to community Affection for entrepreneurs

| 8

Includes altruistic

motivations

Source: Bill Payne


Early-stage investment in Switzerland

0.0

50.0

100.0

150.0

200.0

250.0

300.0

2007 2008 2009 2010 2011 2012 VC start-up VC seed Business Angels

Source: EVCA/PEREP Analytics, conversion €=1.22 CHF / EBAN 2007-2008 / CTI for 2013, A3 Angels 2009-2012

-50%

(M CHF)

+40% 50M

(growth)

130M


Networks and members Networks > 300 investors >30-50 million CHF / year >40 funded startups / year Multi-disciplinary

BA Investment per capita CHF / hab

0

5

10

15

€ M/ M # deals/ M

Swiss Business Angels

10

Source : A3 Angels ; Nelson Gray, EBAN Claude Florin [email protected]

http://www.cti-invest.ch/Members/MembersContainer/Verve-Capital-Partners.aspx�


Survival rate US ~40% Survival rate EU ~40%

Financing and entrepreunarial risks

US Bureau of Labor Statistics, TechStars, Y Combinator. Quoted by Mars data accelerator http://data.marsdd.com/accelerators-worth-the-hype/#sthash.cXov6K8B.dpuf


Investment portfolio model

| 15

Return on Portfolio Investments (1-9) is 3.7X = 26% IRR over 5 Years

Assuming survival rate of 60% and 1 big success – reality is often lower

Portfolio Company

Multiple 5-Year IRR

Portfolio Company

Multiple 5-Year IRR

1 0.0 0% 6 1.6 10%

2 0.0 0% 7 1.6 10%

3 0.0 0% 8 7.6 50%

4 1.3 5% 9 20.0 82%

5 1.3 5% 10 Unknown Unknown


Internal rate of return (IRR)

.xls function = IRR(values, guess) e.g.: IRR(D1:D:60,0.3/12) monthly or annual compounding

| 16

IRR % Years 1 2 3 4 5 6 7

Mul

tiple

1 - - - - - - - 2 100 41 26 19 15 12 10 3 200 73 44 32 25 20 17 4 300 100 59 41 32 26 22 5 400 124 71 50 38 31 26 6 500 145 82 57 43 35 29 7 600 165 91 63 48 38 32

Multiple Years

1 2 3 4 5 6 7

IRR

%

0% 1.00 1.00 1.00 1.00 1.00 1.00 1.00

5% 1.05 1.10 1.16 1.22 1.28 1.34 1.41

10% 1.10 1.21 1.33 1.46 1.61 1.77 1.95

15% 1.15 1.32 1.52 1.75 2.01 2.31 2.66

20% 1.20 1.44 1.73 2.07 2.49 2.99 3.58

25% 1.25 1.56 1.95 2.44 3.05 3.81 4.77

30% 1.30 1.69 2.20 2.86 3.71 4.83 6.27

35% 1.35 1.82 2.46 3.32 4.48 6.05 8.17

40% 1.40 1.96 2.74 3.84 5.38 7.53 10.5


Understanding VCs

Who are VCs? Business managers and entrepreneurs turned fund

managers; professional investors What do VCs do? Invest “other peoples money” Analyze hundreds of potential investments Choose only a few per year After investing, VCs become active in the venture

– take seat on the Board of Directors –some take interim executive management positions –get involved in strategic planning or oversight


VC investments in seed and start-up

29.5

60

.7

0.1

130.

0 0.

0 0.

1 35

4.7

50.3

8.

7 0.

0 69

.9

65.3

27

3.9

55.9

63

.8

56.3

4.

3 3.

0 0.

4 0.

0 84

.8

5.2 15

.4

0.0

103.

2 1.

3 0.

0 47

7.0

0.0

100.0

200.0

300.0

400.0

500.0

600.0

AT

BE

B

G

CH

C

Y CZ

DE

D

K

EE

E

L E

S

FI

FR

HU

IE

IT

LT

LU

LV

M

T NL PL

PT

RO

S

E

SI

SK

U

K

mill

ion

€

M€ EU countries data; 2012

| 19

Source : EVCA


“Tougher times for VCs” Increased financing

requirements European VCs struggling to

raise new funds Stronger BA co-investment

Decreasing exit valuations Limited trade sale

opportunities Closed IPO markets Longer cycles before exit

VC + BA model today

Source : Diego Braguglia, CTI Start-UP, Angel Days 2012

CHF 100K Founders +FFF + Grants

CHF <2M @ CHF 1-2M

Business Angels + Loans

CHF 1-2M @ <CHF 5M

VC + BAs

…

CHF >2M @ >CHF 5M

VC B

Start >6 mo >12 mo >3 year >8 year

0.5-5X multiple

Trade sale

IPO


25’000 funded

6’400 exit 980 >€ 100M wins

35 >€1B winners

€ 290B exit value

VC-funded exits : only few succeed

| 21

Source: Quilvest, 2000-2010 quoted by Jean-David Chamboredon, ISAI

1:4 1:700 1:26

Other wins 23%

Winners 77%


Company Valuation

| 26


Valuation outline

The background Alignment of investors and founders Different perspectives The numbers !! Current early-stage financing trends Business Angels methods for Seed valuation

The Math …. Comparables, Sales Multiple Discounted Cash Flow Product Assets, Replacement Value


The two perspectives

Align investors with entrepreneurs (drives the subsequent scalability of the business) Roadmap and targets for investor Provides incentives for entrepreneurs

| 28

Motivation and control of

Founders

Risk / reward of Business Investors

Valuation based on experience and intuition


Com

pany

Investor and Company views

| 29

Inve

stor

Investor‘s return

Dividends + capital

Cus

tom

ers expenses

Cash Inflow

„Venture Capital “ method

„BA“ methods

•Discounted cash-flow , •Multiples (comparables)

Operating revenues earnings

Investor‘s expenses

Operating costs

Capital payment

Cash Outflow


The Maths – Methods of Valuation

| 30

Market data

Market cap,

similar in the

market

Multiples

financial indices EBIT, …

VC methods, Business Angels

empirical ratios

Performance based

Net assets,

Discounted Cash-Flow

(DCF)


Europe $ 2.6M Switzerland average= $4.2 M 50% = $1.5 - $8 M

Western EU average= $2.6 M 50% = $1.2 - $3.5 M

USA $ 2.75 Business Angels :

– Median valuation = $2.75 M – Two-thirds $1.0 - $3.0 M – 50% = $1.5 - $3.6 M

VC median = $15M

Valuation trends

| 33

Source : Bill Payne, Angel List, Halo report,

1Q’12 1Q’12 1Q’12 1Q’12 1Q’13 <1M 1M 2M 3M 4M 5M 6M 7M+


Bill Payne Management team 0-30% 25-40% Size of opportunity 0-25% 20-30% Product & technology 0-15% 10-30% Sales channels 0-10% 5-20% Competitive advantage 0-10% 5-20% Size of this round 0 - 5% 0-5% Need for funding 0 - 5% 0-5%

Worksheet Don’t make product/technology

95%

Business Angels methods


0-30% Strength of Management Team Impact What is founder’s experience?

+ Many years business experience ++ Experience in this business sector

+++ Experience as a CEO ++ Experience as a COO, CTO, CFO + Experience as a product manager - Experience only as a salesperson of technologist -- Straight out of school

Impact Is the founder willing to step aside, if necessary, for a new CEO?

deal killer Unwilling - Difficult to convince 0 Neutral + Willing

++ Key part of the plan Impact Is the founder coachable?

0 Yes deal killer No Impact How complete is the management team? -- Very incomplete (none identified) - Somewhat incomplete

0 Good start + Rather complete team ++ A complete and experienced management team

0-25% Size of the Opportunity

- Impact What size is the specific market for the company’s product/service?

deal killer <CHF50,000,000 0 CHF100,000,000

++ >CHF500,000,000 Impact What is the potential for revenues in five years?

<CHF30,000,000 0 CHF50,000,000

++ >CHF100,000,000

0-15% Competitive Landscape Impact What is the status of the IP (intellectual property)?

0 Trade secrets only + Core patents pending

++ Core patents issued +++ Complete patent estate

Impact What is the strength of competitors in this market? -- Very strong - Strong 0 Fragmented + Weak

++ Very weak Impact How large are the barriers to entry?

-- Very low - Low

0 Modest + High

++ Very high 0-10% Sales Channels

Impact What channels of sales are in place? -- Haven’t even considered - Many possibilities identified 0 Narrowed to one or two channels + Initial channels verified

+++ Channels established 0-10% Business Stage

Impact In what stage of business is the company? -- Only have a plan - Writing code/in product development 0 Product ready for customer evaluation

++ Positive, verifiable customer acceptance by beta site +++ Customer lined up

0-10% Funding Required Impact What amount of funding is required?

++ CHF250,000 to CHF750,000 + CHF750,000 to CHF1,500,000

0 CHF1,500,000 to CHF20,000,000 (depends on availability of VC capital in region)

BA Methods : worksheet


Berkus Method Sound idea CHF 0.5 Mio. Prototype + CHF 0.5 Mio. Quality mgt team + CHF 1-2 M. Quality board + CHF 0.5 Mio. Any roll-out, sales + CHF 0.5 Mio. Value Range: CHF 1 - 6 Mio.

Meier Method 1 Manager CHF 1.5 Mio. 2 Managers + CHF 1.5 Mio. Value Range: CHF 1.5 - 6 Mio.

Business Angel methods


Discounted cash flow (DCF)

Stage Discount (WACC) CAPM

Seed stage 70-100% 4-14%

Start-up stage 50-70% 4-14%

First stage 50-70%

Second stage 35-50%

Later stage 25-40%

| 43

Source: Patrick Frei & Benoît Leleux ; Jean-Pierre Vuilleumier, Angel Days

Company Value = Sum of discounted FCF + discounted CV

CV Continuing Value

t 1 2 3 4 5 ∞ 0

Discounted by capital costs


DCF valuation issues

DCF is not a suitable method to value start-ups –Valuation >80%derived from Continuing Value –Cumulated FCF negative for planning period –Cost of capital hard to estimate (>40 %) –Discount rates too low ⇒ valuations too high Helps analyze company’s value drivers

| 44

Source : Jean-Pierre Vuilleumier, Angel Day 2013


Comparable ratios “multiples”

EBIT = earnings before interest, taxes, depreciation and amortization

| 45

P&L Turnover - material expenses - personnel expenses - other operating expenses = operative cash flow

- Depreciation = result of operations

- Net interest paid = EBIT

- Tax = annual surplus / annual loss

Revenue

EBITDA

EBIT

Net Income

Valuation ≈ 1X revenue

Valuation ≈ 5X EBIT

Ratio


Comparable ratios

Industry EV/EBITDA* EV/EBIT* EV/Revenue**

Biotechnology NA NA 4 Communications Equipment 5.33 7.75 Computer Hardware 4.91 7.40 Consumer Electronics 3.44 6.35 Consumer Finance 42.67 49.19 Electronic Components 3.70 6.39 Electronic Equipment and Instruments 5.62 8.01 Health Care Technology 5.51 10.45 Home Entertainment Software 4.17 31.04 Integrated Telecommunication Services 5.17 10.28 Internet Retail 13.73 18.41 Internet Software and Services 8.03 22.55 2.4 Semiconductor Equipment 4.65 6.37 Semiconductors 6.31 NA Systems Software 6.27 8.90 Business software 2.6 Application software 3 Wireless Telecommunication Services 6.61 12.17

| 46

Source: Damodoran on-line (Europe * ), http://startupvaluation.com (USA **)

http://startupvaluation.com/�


Adjust valuation using “multiples”

© 2004-2010 Neworks, LLC

47

B C

D E F G

What “multiple” would you buy these businesses?

Actual Projected

Today A sa

les (e

arnin

gs)

time


Discounted Cash-Flow Often over estimates real value Uncertain assumptions Not applicable for growth

companies

Multiples Simple– no negative numbers Time value not considered Just a high-level forecast

Every method gives a different valuation

Source : A3 Angels

8% 10% 15%35% 4,850 5,144 6,13540% 3,351 3,517 4,04845% 2,359 2,458 2,76650% 1,675 1,737 1,92655% 1,190 1,230 1,351ris

k ra

tio

annual growth of the residual value

year2011 2012 2013 2014 2015 2016

0.5 0 250 1,000 2,500 5,000 10,0001.0 0 500 2,000 5,000 10,000 20,0001.5 0 750 3,000 7,500 15,000 30,0002.0 0 1,000 4,000 10,000 20,000 40,0002.5 0 1,250 5,000 12,500 25,000 50,000

year2011 2012 2013 2014 2015 2016

5.0 neg. neg. neg. 2,500 10,000 25,0006.0 neg. neg. neg. 3,000 12,000 30,0007.0 neg. neg. neg. 3,500 14,000 35,0008.0 neg. neg. neg. 4,000 16,000 40,0009.0 neg. neg. neg. 4,500 18,000 45,000

turn

over

mul

tipE

BIT

-Mul

tiple


Need to adjust valuation for Debt

Equity market value (number of shares X share price)

+ Net Debt

(+ net interest bearing financial liabilities – liquid assets )

= Enterprise Value

(adjusted market value)

| 49

Assets Liabilities

capital assets

working capital (assets)

liquid assets

Equity

Debt

working capital (liabilities)


Valuation: VC method

Source : Jean-Pierre Vuilleumier, Angel Days 2012 © CTI -Invest

| 52

Investor’s View (Venture Capital Method) IRR (Internal rate of return)

Sum discounted CF = 0 Value

t 1 2 3 4 5 6

Define the target Internal Rate of Return (IRR) Estimate capital requirement (FCF analysis) Estimate time to exit (5-7 years) Estimate exit value (transactions or multiples)

Backward calculation of the required share


Method Specification of required IRR Rate of return objective,

e.g. 30%. or Target multiple of the investment

e.g. 7.5X Evaluation of exit Time Anticipated valuation at exit

e.g. 25’000

Required share of equity Investment 500targeted return (7.5 X) 3,750

share of the Business Angels 15% valuation in Seed financing round 3,333

total proceeds at exit 27,500 - return preference of VCs 2,500return at pro rata allocation 25,000return share of Business Angels 3,750

Venture Capital Method

Source : A3 Angels


Equidam Equitynet

On-line tools for startup comparison

Source : http://www.equidam.com/ : https://www.equitynet.com/crowdfunding-tools/startup-valuation-calculator.aspx ; www.worthworm.com

Worthworm

http://www.equidam.com/�

https://www.equitynet.com/crowdfunding-tools/startup-valuation-calculator.aspx�

http://www.worthworm.com/�


Equity Share, Dilution & Exiting

| 59


Definitions : pre / post money valuations

Company stage Pre-Seed Seed A-round B-round

Entrepreneur ownership 100% 80% 64% 51%

Seed investor ownership for CHF 250K 20% 16% 13%

A-round investor ownership for CHF 1M 20% 16%

B-round investor ownership for CHF 3M 20%

Pre-money valuation CHF 1M CHF 4M CHF 12M Post money valuation CHF 1.25M CHF 5M CHF 15M

Entrepreneur value CHF 1M CHF 3.2M CHF 7.7M

| 64

Dramatic increase in the value of the company and value of your share The relevant question is not “how much of the pie do I own?”

rather “how big is the pie?”


Dilution and returns at Exit

Company stage Investment Ownership Value Multiple

Entrepreneur ownership - 51.2% CHF 26M -

Seed investor ownership CHF 250K 12.8% CHF 6M 26X

A-round investor ownership CHF 1M 16% CHF 8M 8X

B-round investor ownership CHF 3M 20% CHF 10M 3X

Total CHF 4.25M 100% CHF 50M -

| 65

•No investors subsequent to Round B • 7 years after seed investment, Company acquired for CHF50M

•Seed Investor’s IRR is ~60% • Depending on time of investment, Round A & B investors likely IRR 30-50% • Everyone happy!


Valuation & Dilution scenario

Adapted from Neworks, LLC

66

The hypothetical high-tech start-up companyDilution of ownership and Increase in Valuation from idea through cash-flow positive company.

Time zero 6-12 months Year 1 Year 2 or 3 Year 3 or 5 Seven to ten years later

Valuationpre-money 750,000$ 83.3% 1,500,000$ 75.0% 3,000,000$ 60.0% 10,000,000$ 66.7%investment 150,000$ 16.7% 500,000$ 25.0% 2,000,000$ 40.0% 5,000,000$ 33.3%post-money $500,000 100.0% 900,000$ 100.0% 2,000,000$ 100.0% 5,000,000$ 100.0% 15,000,000$ 100.0% $56,000,000 100.0%

Share price (rounded) 0.27$ 0.40$ 0.67$ 1.00$ 2.00$ 7.47$

Authorized sharesCommon 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000

Issued sharesUniversity/Inventors 93,750 5.0% 93,750 4% 93,750 3% 93,750 1.9% 93,750 1.3% 93,750 1.3%Founders 1,781,250 95.0% 1,781,250 79% 1,781,250 59% 1,781,250 35.6% 1,781,250 23.8% 1,781,250 23.8%Pre-seed investors 375,000 16.7% 375,000 12.5% 375,000 7.5% 375,000 5.0% 375,000 5.0%Seed investors 750,000 25.0% 750,000 15.0% 750,000 10.0% 750,000 10.0%VC round A investors 2,000,000 40.0% 2,000,000 26.7% 2,000,000 26.7%VC round B investors 2,500,000 33.3% 2,500,000 33.3%Total 1,875,000 100.0% 2,250,000 100.0% 3,000,000 100.0% 5,000,000 100.0% 7,500,000 100.0% 7,500,000 100.0%

Value of holdingsUniversityInventors $25,000 $37,500 $62,500 $93,750 $187,500 $700,000Founders $475,000 $712,500 $1,187,500 $1,781,250 $3,562,500 $13,300,000Pre-seed investors $0 $150,000 $250,000 $375,000 $750,000 $2,800,000Seed investors $0 $0 $500,000 $750,000 $1,500,000 $5,600,000VC round A investors $0 $0 $0 $2,000,000 $4,000,000 $14,933,333VC round B investors $0 $0 $0 $0 $5,000,000 $18,666,667Total $500,000 $900,000 $2,000,000 $5,000,000 $15,000,000 $56,000,000

Deliverables Small team IP assessment Space The remaining Design freeze 4 or 5 years of sales growth:at the end Plan License A few key milestones key milestones Manuf'g scale up Sales of $30 Mof the stage: Family collateral Tech transfer (Prototype, market indicators) OEM partner collateral Market'g & Sales ready Earnings of $7 M

Seed collateral VC collateral Distribution 8 x Earnings multiplier

The beginningAt founding

Milestone 1Pre-seed round

Milestone 2Seed round

Milestone 3VC Round A

Milestone 4VC Round B

Milestone 5"Peak Sales"


Target equity at exit is not a function of initial equity stake but the reflects of the company strategy Equity at exit depends on:

– Technology success, – Negotiation power, – Market, – Competition.

The name of the game … is not to minimize dilution at each stage of a company’s existence But to maximize the value

of your share at the end of the process.

How to maximize value

Source : Diego Braguglia, CTI Start-UP, Angel Days 2012

Harvard Business School, Financing Entrepreneurial Ventures


Creative Negotiations

Let the Market Set Price Take “convertible note” Offer anti-dilution clauses

Performance Based Valuations If pre-determined milestones achieved, valuation is

CHF xM If not, valuation is CHF yM

Offset high valuation with preference Preferred shares with liquidation preference


Convertible Loan

Subordinated convertible loan –Mandatory conversion upon equity round –Same terms as equity round with x% discount Avoids valuation when

–company is young –fair valuation difficult –Bridge loan required Easy to implement Generally not well received by future equity

investor

| 69

Source : Peter Pfister, Angel Day 2013


Anti-Dilution Provisions

Principle: –Shareholders agreement clause –In case of a down round the dilution is

absorbed by the founders (Common Shareholders).

Several ways to calculate (full rachet, weighted

average) Adds responsibility on the founders to create

value

| 70



Principle: – Shareholders agreement exit

clause : – Preferred Shareholders =

investors – Get paid x times (usually 1X )

investment before other payouts.

Improves returns Saves a % of investment in

case of failure A question of fairness

Liquidation Preference


| 71


Liquidation preference example


Investment CHF 300 K Pre-Money CHF 1,200 K Founders share 80% Investor share 20% Exit value CHF 600 K 1,200 2,400 3,600 4,800 Liquidation preference 0 X 0 X 0 X 0 X 0 X Payout founders CHF 480 K 960 1,920 2,880 3,840 Payout investor CHF 120 K 240 480 720 960 Multiple 0.4 X 0.8 X 1.6 X 2.4 X 3.2 X Liquidation preference 1 X 1 X 1 X 1 X 1 X Payout founders CHF 240 K 720 1,680 2,640 3,600 Payout investor CHF 360 K 480 720 960 1,200 Multiple 1.2 X 1.6 X 2.4 X 3.2 X 4.0 X Liquidation preference 2 X 2 X 2 X 2 X 2 X Payout founders CHF - K 480 1,440 2,400 3,360 Payout investor CHF 600 K 720 960 1,200 1,440 Multiple 2.0 X 2.4 X 3.2 X 4.0 X 4.8 X

| 72


Getting started

| 73


Investment process

4-6 Months

50% Screening

Evaluation

Due diligence

Investment 1%


Early early stage investors

Swiss-based VCs International VCs Swiss-based BANs Aravis Atlas Venture Mountain Partners Group

Biomed Invest Baytech Venture Go Beyond Ltd BV group Creathor Venture Business Angels Suisse (BAS) Core Capital Drapper Investment Bio Valley BAC

EPS value plus Dpixel Start Angels Network Invision Earlybird b-to-v New Value Emertec A3 Angels Redalpine Venture Partners NBGI Ventures Club Valaisan des BA Vi Partners Index Ventures Blue Ocean Ventures

Aventic OCAS Ventures BSI health Capital Sofinnova Eurofin Capital / Polytech ventures Swarraton Partners

Defi gestion Target Partners Fongit Wellington Jade invest Polytech Ventures Tschudin+Heid Vinci Capital


Steps in the BA investment process

Entrepreneur Business Angel

Source: fiban.org

Introduction Pitching

Deal flow identification

Negotiations of business opportunity

Valuation discussions Due diligence Business

plan

Investment readiness

Shareholder agreement Financing


Steps in the VC investment process

Source : Guide to private equity, BVCA / PWC, 2003

Stage Evaluating B. Plan Due diligence Negotiation Monitoring EXIT

Entrepreneur Prepare Business Plan Contact investors

Provide information

Disclose all relevant business information

Provide periodic management accounts Communicate with investors

Entrepreneur & investor

Meet to discuss BP Build relationship Outline terms Liaise with external consultants and accountants

Negotiate final terms Document constitution and voting rights

Investor Review the Business Plan

Conduct enquiries Value the business Consider financing structure Initiate external DD

Draw up completion documentation

Seat on board ? Monitor investment Constructive input Involvement in major decisions

Reports Business Plan Offer letter Consultants reports Accountant reports

Disclosure letter Warranties and indemnities Memorandum and articles of association Shareholder agreement

Management accounts Minutes of boards and other meetings


Negotiations

Why do deals fall through? entrepreneur struggling to let go of control limited role models (investor-backed

companies) inexperienced counsel “shoppers”, there’s a better deal out there two sides of the table can’t agree on “valuation


Select an investor who understands your business


Thank you

Your questions ? Or case study

80


Case study

Real Start-up Company Founded in 2009 First financing in 2011 (BA) Successful market entry Closed financing round in spring 2013 Financial planning as well as valuation

performed with Fintool 8.0

| 81



Case study

| 82



DCF calculation

| 83


CV

Growth rate and Return on invested capital (ROIC)

estimated after the planning period

(Copeland) Continuous value (CV)

represents 80 % of total Present value (PV).


WACC cost of capital calculation

| 84

Source : Capital asset pricing method (CAPM); , Jean-Pierre Vuilleumier, Angel Day 2013


Valuation sensitivity

| 85


Date post:	17-Oct-2014
Category:	Economy & Finance
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Venture2014 epfl financing

Economy & Finance