This financial model describes how to value early-stage firms using VC-method when fundraing from a venture capital. It alsoo shows how to calculate the share ratio between existing shareholders and investors.
Furthermore, when planning 2nd round fundraising in the future, it explains what variables you should consider if the existing owner wants to maintain a certain percentage of ownership (to keep the management right) at that time.
You can understand this template more easily when you refer to the relevant blog below.
- Early-stage Valuation with the Venture Capital method
- Post-value, Pre-value, and Share ratio calculation
It is the process of estimating profits to value a venture company using the VC method.
You can edit the estimated turnovers and net income in the yellow cells.
It is the result of the arithmetic average PER of the peer-group of the target company.
It is the equity value of the company calculated with the VC method.
The yellow cells of ‘Target Return’ are the required rate of return of the first and second investors, and the one of ‘Investment’ is the desired capital amount to raise.
After 1) estimating turnovers and net income of the target company and 2) finding comparable companies, 3) it calculates equity value using the required rate of return of the current and the next round venture capital firms.
The sheet of step 4 shows how the holdings of existing shareholders and venture capitals fluctuate according to the amount of venture capital investments in the present and future.
Excel Template: Download Advanced Version
This financial modelling is a free version and is as follows.
- Consist of all the sheets up to step 4 above
- Assumed the future additional secondary fundraising after the primary one
- You can understand how the company’s value can change depending on changes in estimated sales and profits, and changes in the first and second investors’ required rate of returns
- Share distribution between existing shareholders and investors can be identified according to the valuation.
- Therefore, this Excel user can establish an investment attraction strategy by grasping the share ratio that fluctuates according to the firm’s estimated profit, the amount of fundraising, and the investors’ required rate of return.
Consulting: Valuation of a venture company and share ratio strategy according to investment attraction
Venture companies that are facing or planning to attract investment can receive the following consulting.
- Equity valuation using the venture capital method
- Calculation of the share ratio between existing shareholders and investors based on investment attraction plan
- Upon the estimated stock value and share ratio, preparation of a capital-raising strategy including the appropriate amount of financing, timing, and necessity of additional fundraising in the future.