This document presents a valuation template using the venture capital method to value a multi-stage investment over 5 years. It shows cash flow and income statement information each year, including external funds required, equity raised, beginning and ending cash balances. It also calculates the investor's required future value and equity share at each stage based on hurdle rates, the continuing value multiplier and resulting company valuation.
This document presents a valuation template using the venture capital method to value a multi-stage investment over 5 years. It shows cash flow and income statement information each year, including external funds required, equity raised, beginning and ending cash balances. It also calculates the investor's required future value and equity share at each stage based on hurdle rates, the continuing value multiplier and resulting company valuation.
This document presents a valuation template using the venture capital method to value a multi-stage investment over 5 years. It shows cash flow and income statement information each year, including external funds required, equity raised, beginning and ending cash balances. It also calculates the investor's required future value and equity share at each stage based on hurdle rates, the continuing value multiplier and resulting company valuation.
This document presents a valuation template using the venture capital method to value a multi-stage investment over 5 years. It shows cash flow and income statement information each year, including external funds required, equity raised, beginning and ending cash balances. It also calculates the investor's required future value and equity share at each stage based on hurdle rates, the continuing value multiplier and resulting company valuation.
Required Required Beginning Ending Investor's Required Future Value and Equity Share Share Share Value Third Stage 2.43% 2.43% $910,000 Second Stage 10.30% 10.05% $3,767,723 First Stage 31.77% 27.80% $10,426,803
Ownership Required 40.28% $15,104,527
Assumptions 13.2
Figure 14-1
Objective Determine the fraction of equity an outside investor would require if the investment is made in stages (compared to single-stage). The spreadsheet shows how the required investment is determined at each stage, based on the Venture Capital Method.
Assumptions New venture needs $700, 000 of cash per year. Projected negative earning initially, then rapid growth. Earnings reach $2.5 million by year 5. No free cash flow during first 5 years. Typical earnings multiple of comparable firms is 15. Resulting projected continuing value is $37.5 million in year 5. Hurdle rates consistent with Venture Capital Method. Risk-free rate is 4% per year. Investment is made at times zero, two and four.
