1.

Introduction to venture valuation

（1） Understand the difference between price and value
（2） Critically assess the consequences of this difference in the context of a VC round
（3） Recognize situations requiring a venture valuation and derive own examples
（4） Apply specific characteristics of startups to new examples
2. DCF valuation
（1） explain the basic concept of present value calculation
（2） understand the meaning of “terminal value” and calculate the present value
（3） interpret the result of a present value calculation
（4） adapt the different steps to calculate cash flow to equity holders to various examples
（5） apply the Capital Asset Pricing Model
（6） distinguish the different components of cost of equity and understand its single meaning
（7） understand, calculate and evaluate the WACC model and the equity model and its
differences
3. Multiple valuation
（1） explain the concept of multiple valuation
（2） distinguish the different types of multiples
（3） adapt and calculate the different steps of peer group multiples for various examples
（4） understand the difference between equity and enterprise multiples and name examples
（5） apply the two alternatives of future oriented multiples and interpret its results
4. Real options
（1） explain the concept of call and put options
（2） distinguish the different types of call and put options and its characteristics
（3） derive own examples regarding the real options approach
（4） evaluate the real options approach
5. Context based valuation
（1） explain the concept of the Venture Capital method
（2） adapt and calculate the different steps of the Venture Capital method
（3） understand factors that are influencing the target rate of return
（4） evaluate the Venture Capital method and its characteristics
（5） apply the different methods of Rules of Thumb and interpret its results
6. Unicorn case study
（1） understand the term “unicorn”
（2） name examples of unicorns and its characteristics
（3） evaluate the “unicorn bubble”
（4） understand unicorn statistics and its trends
（5） apply the study on unicorns by Bock/Hackober and interpret its results
7. Case study inge
（1） give an overview of the inge watertechnology case study
（2） understand the differences between the Venture Capital industry in Germany and the
U.S.
（3） apply different valuation techniques to inge and calculate your own valuation of inge
（4） interpret a possible exit of inge and further future options
difference between value and price
value: determined by the benefits for the owners; sets boarders for the price range
price: sum of money that is exchanged between buyer and seller
price is what you pay, value is what you get
why the differences between value and price important in the context of a VC round?
Differentiation is important because different people have different values. For this calculation
future prospects have to be taken into account. Also, when the number of shareholders changes,
dilution has to be quantified.
specific characteristics of starups
no or relatively short company history
scarcity of resources( financial resources, human capital)
intangible assets
requirement for flexibility
downside risk& upside potential
valuation requirements
forward looking
realistic portrayal( flexibility, downside risk& upside potential)
user friendliness(data availability& reliability, complexity& transparency)
acceptance
basic concepts of PV
value=cash---cash is the king
time value of money---1 euro today is worth more than 1 euro tomorrow
risk value of money---safe money worth more than risky money

Terminal value calculation

General assumption: cash flow are infinite

The more the terminal value depends on trends and high growth expectations, the more relevance
it has for the whole company value.
Cash flow calculation
Steps to calculate cash flow to equity holders
Operating profits(EBIT)—working capital—free CF—CFD—CFE
Discount rate estimate
Capital Asset Pricing Model (CAPM)
Beta calculation
• What does the beta factor represent?
Describes the systematic risk by expressing quantitatively the volatility of a company's stock to
changes in the entire market.
• What is the main issue of calculating cost of capital for new ventures?
The main difficulty is to find a comparable peer-group as benchmark and orientation for the new
company. A peer-group can either be defined by research on comparable companies, or by relying
on industry-betas.
DCF models
Equity model
The Equity Model relies on CFE and the cost of equity.

WACC model
The WACC Model relies on FCF and the WACC as well as the PV of debt.

Evaluation of DCF models

Concept
Company value derived from market prices of comparable companies
Types of multiple

Basic steps of peer group multiples

What is the main problem when using peer group multiples for young high growth
companies?
• Comparable companies are hard to determine.
• Obtaining enough information about the comparable companies is difficult – lack of information.
• Performance indicators low for startups.
• High growth rate for startups.
Differences between equity and enterprise value multiples

Future oriented multiples

Different types of call&put options
Real option approach
Characteristics of real options

Basic forms of real options

Buying a piece of undeveloped land can be considered a growth option

Developing R&D projects can be considered a learning option
Carrying an umbrella on a rainy day can be considered an insurance option
Evaluation of real option
Concept of venture capital method
Context: venture prior to a venture capital financing round
Valuation perspectives:
Valuation from the perspective of a venture capitalist
Calculation of the value of a target
Calculation of the requested share of ownership and price of shares
Steps of venture capital method:
Factors influencing the target rate of return

Evaluation of VC method
Different methods of rules of thumb
What is a unicorn?( Characteristics:)
Privately held company younger than 10 years
More than 1 billion dollar valuation
Examples: Flixbus, Spotify, zalando, canvas…
Evaluate the unicorn bubble
Hypotheses and results:
High investor reputation--- increases unicorn status
Founder in cluster--- increases unicorn status
CVC-backing--- increases unicorn status
Inorganic growth---increse post-money valuation

The inge water technology

What?(water filtration cleantech company) Who?(founded in 2000 by Dr.Peter Berg & Miichael
Hank
Differences between the venture capital industry in Germany and the U.S.
Harder for german VC’s to attract investors
Legal, institutional aspect—less VC available in Germany
Culture aspect—risk-averse VCs, stigma of failure, role models’
Market in europe is more fragmented
VC funds are smaller in Germany than in US
Mindset issue, labor-related, germans don’t think ”big”
Larger growth possibilities in the US
Top talents in Germany prefer large corporations
Exit options: IPO rarely possible(Germany)
Bursting dot-com bubble—bad experience
German VC funds have smaller ticket sizes for single start-ups
Credit/bankruptcy law stricter in Germany
Interpret a possible exit of inge and future options
Pwg
PwC NextLevel is the leading engagement platform for value creation between startups,
corporates, and venture capitalists in Germany.
Valuation methods: multiples(pre-/post-money multiples), scored method, VC method, DCF
Startups are difficult to value because of:
Low or no sales
Very short history
Low survival expectation
New business models
Scored method: evaluation of a startup based on quanlitative assessment criteria( management,
product, market, strategy, other)
Soundloud(calculation)