The Startup Equity Valuation Timeline Angel Investment & Valuation Angel Funding: The Valuation “Triangle” Three Valuation Methods VC Valuation Approach: Industry Standard Discount Rates Comparables Valuation Approach: Median/Mean Round Size Comparables Valuation Approach: Pre-Money Valuation Range Angel Valuation Considerations The Dave McClure Five “Million Dollar Point” Approach*

1. June 18, 2014
Efrat Kasznik, Founder & President
Foresight Valuation Group, LLC
Startup Valuation
for Angel Investors

2. 2Foresight Valuation Group © 2014
About Me: Efrat Kasznik
 Founder and President, Foresight Valuation Group, a
Silicon-Valley based Intellectual property (IP) valuation,
strategy and start-up advisory firm.
 Valuation and strategy expert, with 20 years of
experience analyzing IP portfolios across industries
 Lecturer, Stanford Graduate School of Business
 Chair, Cloud Committee, Licensing Executives
Society (LES)
 Top IP strategists, IAM 300 List 2013-2014
 Co-founder, CFO and Advisor to startups and
incubators in the US and Europe, including: Stanford
Venture Lab, The HUB Trieste, Astia Angel Fund

3. 3Foresight Valuation Group © 2014
The Startup Equity Valuation
Timeline
Seed
Funding
Stock
Options
Series
A, B, C
M&A
IPO
Available Information
Low High

4. 4Foresight Valuation Group © 2014
Angel Investment & Valuation
Angel Invest?
Priced
Not
Priced
Convertibl
e
Note
No
Fit
Preferred
Stock
How
to
Invest
?

5. 5Foresight Valuation Group © 2014
Angel Funding: The Valuation
“Triangle”
Funds
Raised ($)
Ownership
(%)
Valuation
($)
< $1M
20%-40%$2.5M

6. 6Foresight Valuation Group © 2014
Angel Valuation Case Study:
Floome Smartphone Breathalyzer
Customers
Production
FulfillmentFinancials
Team

7. 7Foresight Valuation Group © 2014
Three Valuation Methods
 VC Valuation Approach
 Adjusted Comparable Valuation Approach
 Heuristic Approaches (experience based)
 Example - Dave McClure’s 5 Points

8. 8Foresight Valuation Group © 2014
$20
Million
$100
Million
$5
Million
$2.5
Million
5X
Exit Multiple
70-80%
Discount Rate
= 20x ROI
Revenu
e in
Year 5
Value
in Year
5
VC Valuation Approach:
At Exit Point (Year 5)
Value
Today
50% future
dilution
Fully
Diluted
Value
Today

9. 9Foresight Valuation Group © 2014
VC Valuation Approach:
Industry Standard Discount Rates
• 80%+Seed
• 50-70%Angel
• 40-60%Series A
• 30-50%Series B
• 25-35%Bridge
Sources: How Venture Capital Works , Harvard Business Review
A Method for Valuing High-Risk Long-Term Investments, Harvard Business School

10. 10Foresight Valuation Group © 2014
Comparables Valuation Approach:
Median/Mean Round Size
Source: Halo Report 2013

11. 11Foresight Valuation Group © 2014
Comparables Valuation Approach:
Pre-Money Valuation Range
Source: Halo Report 2013

12. 12Foresight Valuation Group © 2014
Angel Valuation Considerations
Benchmark
s
Company
Metrics
Your
Investme
nt
Objective
s
External
Factors
• Market Size
• Partnerships
• Regulation
• Litigation
• Funding & Exits
• Comparables
• Future Trends
• Target ROI
• Exit Horizon
• Team
• Product
• Execution (Beta)
• IP portfolio

13. 13Foresight Valuation Group © 2014
The Dave McClure
Five “Million Dollar Point”
Approach*
 Revealed by Dave McClure (500 Startups) at a
TechCrunch Disrupt Event (2011)
 Each “point” worth $1M:
1. Market
2. Product
3. Team
4. Customers
5. Revenue
>> Maximum: $5 Million
 * Efrat’s 6th point: IP (patents)>> add another $1M

14. 14Foresight Valuation Group © 2014
Angel Valuation Resources
 Angel Resource Institute
www.angelresourceinstitute.org
 Fenwick & WestSeed Financing Survey 2012 of
Internet/Digital Media and Software Industries
 Silicon Valley Bank: The HALO Report 2013
 Center for Venture Research
https://paulcollege.unh.edu/cvr

15. THANK YOU!
Presentation available upon
request
Efrat Kasznik
President, Foresight Valuation
Group
ekasznik@foresightvaluation.co
m
650-561-3374
http://www.linkedin.com/in/ekasz
nik