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2. Course Objective
To learn how to value a private company for the
purposes of raising money.

3. Key Learning Outcomes
● Learn how assets are valued
● Determine the value of any business
● Understand how to have the conversation of
valuation with investors

4. What is Valuation
Valuation is value of an asset.
The asset in a private company is its "stock" or
equity which represents the % ownership stake
in the company.

5. How is Valuation set?
Requires an educated guess by the seller to
start with an "asking price":
● What have similar assets sold for?
● Why have they sold?
● What will be / are the primary drivers of value?
Valuation is "set" where the buyer and the
seller of an asset meet at a price.

6. Valuation: Every Asset Has Value

7. And it can be negative!

8. How Value Determined?

9. How Value Determined?

10. How Value Determined?

11. How Value Determined?

12. To bring in an investor, a Business Owner has
to sell something - that something is Equity
("Stock").
The amount of stock sold to the investor
represents a percentage ownership in the
company.
The "Asset" of a Business = Stock

13. ● What have other similar companies been
valued at?
● What percentage of the company are you
willing to give up for $x
● Create a market and get people to "bid" - i.e.
make an offer to invest
How to Value Stock

14. A Financial Model with a Discounted Cash Flow
Model "DCF"
The Formal way to Value Stock

15. ● Cash flow can be interpreted many ways –
there are no “right” or “wrong” answers
● You need to define the context of cash flow
and be consistent in its analysis
● Stocks: Many use earnings before interest
tax depreciation amortization (EBITDA) and
subtract Capital Expenditures
● Cash Flow needs to be what you as an
owner will reap from your investment
– after everyone else is paid.
You define Cash Flow

16. 1. Future cash flows are estimated
2. Discounted back at an appropriate rate
(often a firm’s cost of capital)
3. Divided by ownership rights (shares) to
determine the value per owner (per share)
Discounting the Cash Flow

17. ● Every asset is only worth what someone is
willing to pay for it
● Supply vs. Demand
● All valuations have highly subjective inputs
that need to be evaluated by the buyer (and
seller)
Every DCF Valuation can be argued

18. Valuation thru Modeling: Myth #1
Since Valuation is quantitative, Valuation is
objective
While quantitative, inputs leave plenty of
room for subjective judgments
Final values derived from models are
colored with human bias

19. Valuation thru Modeling: Myth #2
A well-researched model and well-done
valuation is timeless
Valuation can change everyday with
constant inputs from the marketplace

20. Summary. Valuation of an Asset is:
● Often subjective, colored by the bias of
its inputs
● Determined by
○ investor perceptions about it
○ Supply and Demand
● The Present Value of the future cash
flows

21. Keys to Success
● Create a market. The only way to sell stock is
to have a group of willing buyers!
● Leave the valuation conversation to the end -
get potential investors enamored with the story
first.

22. FAQs
Who sets a valuation?
Once you decide your valuation, do you put a
stake in the ground and that's what it is?
Pros and Cons of having a high/low valuation.

23. FAQs
Is there a right or wrong valuation?
Can valuation change over time?
Does my valuation change each time I try to
bring money in?

24. FAQs
What are typical valuations for startup
companies? Range?
Do I have to set a valuation before I know how
much money to raise?
Is the equity I have to give to investors
affected by my valuation?

25. FAQs
Does a higher valuation make me looked at as
more likely to succeed?
Do I have to have a valuation when seeking
capital?
Does a valuation play into investor
psychology?

26. FAQs
When and how do you negotiate Valuations?

27. Action Plan
● Discover an Estimated Valuation
○ What have other companies sold stock for?
○ What are you willing to give up?
○ Be informed of the economic upside of your
company
● Engage potential buyers
● Ask them to offer you a term sheet
○ Great video < 2 minutes
○ Engaging write-up
○ Unique rewards

28. Next Steps
● Join our Master Fundraising Course
● Join us now for 50% off
● "FAN" www.udemy.com/raisemoneyusingdigitalmedia/
● Feedback: Jason (at) INVESTyR.com