Venture Valuation: Context-specific Valuation Flashcards
What are the valuation steps in the venture Capital method?
- Future value calculation
- Present value calculation
- VC share of ownership calculation
- Future dilution compensation
How is the future value calculated?
Based on multiples:
FV_T = M_PIi * PI_i,TC,T
Based on DCF terminal value:
(1b) FV_T = CFTE_T+1 / r // r: cost of equity
(1c) FV_T = CFTE_T * (1+g) / (r-g) // g: growth rate
How is the present value calculated?
Post-money: PV_0,Post = FV_T / (1+r)^T // T: time of exit, r: target rate of return
Pre-money: PV_0,Pre = PV_0,Post - I // I: investment sum
How is the desired share of ownership calculated?
SO = I / PV_0,Post // I: investment sum
How is the number and price of shares calculated?
New number of shares: NS = OS * SO_0 / (1-SO_0)
Price of new shares: P_NS = I / NS
In the face of dilutive investors, how is the share of ownership to be demanded at time 0 (SO_0) calculated to reach a desired ownership of SO_T at time t?
SO_0 = SO_T / RET