Please take a moment to view my new video, Developing a Realistic and Defensible Valuation for a Start Up Company:
Hello, I’m Tardy Bryant with the Gathering of Angels. We have been in business for the last 20 years helping young companies raise money.
One of the basic tenets of raising seed and early-stage capital is the development of a realistic and defensible valuation. That means what the
company is worth today even though it may be pre-revenue. I use a formula
called discounted cash flow. I use a 40% internal rate of return and a market rate price-earnings ratio. I take the 3rd and 5th year net operating income after tax for year three and year five, multiply that times an industry multiple called a p/e, let’s just say fifteen, that gives me future value which I average and then to bring it back to present value, today’s value, I discount that about 40% internal rate of return.
This is the kind of return that seed and early-stage investors are looking for if they want a 40 to 50 percent return on its money per year.
So this is how I do valuations.This is spelled out in a lot more detail in my book called the Entrepreneur’s Guide to Raising Capital from Angel Investors.
Please contact me if you have any questions. My cell phone is (404)606-2013 and my email address is TarbyCBryant@gmail.com.