Valuation assuming no dilution

Inputs
(1) New money from VC: 1,000,000 dollars
(2) Net Income in 5 years: 500,000 dollars
(3) Comparable companies PER: 20 times
Investment horizon: 5 years
Shares outstanding(Shout): 1,000,000 shares
VC required rate of return 50%
Outputs
FV of VC investment at required return= 7,593,750 dollars
(2)x(3)= Value of company in 5 years: 10,000,000 dollars
VC's Ownership = 75.94%
Q. How many shares should VC purchase?
X/(SHOut+X)=VC's Ownership
X=VC's Ownership*SHOut/(1-VC's Ownership) 3,155,844 shares
Computing implied valuation
Q. What price per share should VC agree to pay?
P=VC investment / VC's shares 0.32 dollars
Q. What is the pre-money valuation of the firm?
PreV=Shout*P 316,872 dollars
Q. What is the post-money valuation of the firm?
PostV=(Shout+VCshares)*P=PreV+NewMoney= 1,316,872 dollars
Q. What is the founder's carried interest?
Carried interest = (new price) * (shares owned) = 316,872 dollars
1,316,872
Investment 7000000
Outshare 500000
FV= ₹ 238,085,568.00
Startup Value 300000000
Ownership 79.4% 79.40%
shares Purchase 1922698.5 1927184.5
Price per share 3.6407164671149 3.6
Pre money Valuation 1820358.2335574 1800000
Post Money Valuation 8820358.2335574 8800000

OutShare 1000000
PE 25
Earnings of Startup 4000000
Value of Startup 100000000
Round 1 Round 2 Round 3
Investment 5000000 2500000 2500000
Discount 60% 50% 50%
Future Value ₹ 32,768,000.00 ₹ 5,625,000.00 ₹ 5,625,000.00
Final Ownership 32.77% 5.63% #DIV/0!
Retention Ratio 94.38% 100% 100%
Current Ownership 30.10% 10.20% 7.50%
Shares purchase 430615.16452074 162497 129171
Total Out shares 1430615 1593113 1722284
Price per share 11.611295681063 15.384852941 19.354145
Terminal Share Price

PE 12
Earnings in 4 years 15000000
Investment 7000000 7000000
Outshare 600000 600000
FV= ₹ 35,437,500.00
Startup Value 180000000
Ownership 19.7% 19.70%
shares Purchase 147081.7 147198.0
Price per share 47.592592592593 47.6
Pre money Valuation 28555555.555556 28560000
Post Money Valuation 35555555.555556 35560000
 OutShare
PE
Earnings of Startup
Value of Startup

Investment
Discount
Future Value
Final Ownership
Retention Ratio
Current Ownership
Shares purchase
₹ 32,768,000.00 Total Out shares
Price per share
32.8%

487386.9585911

OutShare 600000 600000

PE 12
Earnings of Startup 15000000
Value of Startup 180000000
Round 1 Round 2
Investment 7000000 3000000 7000000
Discount 50% 30%
Future Value ₹ 35,437,500.00 ₹ 3,900,000.00
Final Ownership 19.69% 2.17%
Retention Ratio 97.83% 100%
Current Ownership 20.12% 2.17% 20.10% 2.20%
Shares purchase 151159.6907491 16636 150938.7 16892.3
Total Out shares 751160 767795 750939 767831
Price per share 46.30864197531 180.33653846 46.37645
 1000000
25
4000000
100000000
Round 1 Round 2
3000000 2000000
60% 50%
₹ 19,660,800.00 ₹ 4,500,000.00
19.66% 4.50%
95.50% 100%
20.59% 4.50%
259243.2409625 59336.068946
1259243.240962 1318579.3099
11.57214355469 33.706311111
Valuation assuming future dilution
Inputs
Net Income in 5 years: 500,000 dollars
Comparable companies PER: 20 times
Value of company in 5 years: 10,000,000 dollars
New money from round 1 VC (VC1): 500,000 dollars
VC1 Investment horizon: 5 years
VC1 required rate of return 50%
New money from round 2 VC (VC2): 250,000 dollars
VC2 Investment horizon: 3 years
VC2 required rate of return 40%
New money from round 3 VC (VC3): 250,000 dollars
VC3 Investment horizon: 1 years
VC3 required rate of return 30%
Outputs
Q. The final ownership
=future value(investment)/terminal value(company)
Round 1:
Round 2:
Round 3:

Conversion to current ownership and prices

Final % ownership: The percent ownership a given investor will hold as of the terminal
year of a project
Current % ownership: The percent ownership he holds as of his investment
Retention % = (Final % ownership) / (Current % ownership)
= 1 - (Total of future final % ownership)
Round 1:
Round 2:
Round 3:
Current % ownership = Final % ownership / Retention %
Round 1:
Round 2:
Round 3:

How many new shares should VCs purchase at each round?

X/(SHOut+X)=VC1's Ownership
X=VC1's Ownership*SHOut/(1-VC1's Ownership)
Shares outstanding(Shout) before round 1: 1,000,000 shares
Round 1: - shares
Shares outstanding(Shout) before round 2: shares
Round 2: shares
Shares outstanding(Shout) before round 2: shares
Round 3: shares
Shares outstanding(Shout) after round 3: shares
What price per share should VC agree to pay?
P=VC investment / VC's shares
 Round 1: dollars
Round 2: dollars
Round 3: dollars
Terminal Share Price dollars
IRR confirm
IRR of Round 1
IRR of Round 2
IRR of Round 3