Show Me the Money: Jong Lee Have a great idea, but don't know the first steps on how to put a number on the business? Jong Lee, successful venture capital investor and entrepreneur, will be speaking about the practical steps to take to value your business, the common terminology and jargon used to describe different types of valuations, how outside investors and angels will view your business, and other basics of Venture Capital.

1. SME Clinic Series
Show Me The Money!
Jong Lee
Feburary 5, 2013
Hong Kong
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2. Thank You
For Coming!
JLL Entrepreneur Series, Jong Lee
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3. Happy Hour
until 8PM!
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4. Jong Lee
• Founder & Managing Director of RGL Holdings, Ltd.
– Private Equity, Venture Capital, Turnarounds & Advisory
– Current focus on cross border tech, startups & SMEs, special
purpose real estate, social enterprise and education
– Active in Asia, N. America and Europe
• My Former Lives:
– H&Q Asia Pacific – Oldest Pacific Rim PE / VC Firm
– UBS – Technology Investment Banking
– Simpson Thacher & Bartlett – LBOs for KKR & Blackstone
• Lived and Worked in Hong Kong, Tokyo, Beijing,
Seoul, Los Angeles, Silicon Valley, New York, etc….
• J.D. Columbia University (yes, I’m a lawyer…)
• BAS (Bioengineering) & BA (Political Science).
University of Pennsylvania

5. Selected Deal Sheet
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6. Community Involvement
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7. Let’s Talk About
Money…
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8. Different Kinds of [Money]
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Upfront Cash (YES!)
Staged Cash
Lines of Credit
Guarantees
In Kind
Liquid Assets
Resources
What else?
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Equity
Debt
Convertible
NREs
Personal
F&F
Angel
VC / PE
Real Revenues!
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9. What are you
doing?
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10. Why is it Worth
Something?
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11. What is of Value?
• The People
– You
– Your Team
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Customers
Relationships
Product
Intellectual Property
– Technology
– Other IP
• Your Head Start
• Your Cash / Revs
• Your synergy with
someone or
something else
• Competition
• Location
• Regulation
• What else?
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12. What is of Value
May Depend a Lot
on Who is Looking
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13. Unfortunately, No
Matter What, A Lot
of Value Depends on
Timing and Supply
and Demand for
What You Have
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14. Ok Let’s Talk VC
Valuations
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15. Assumptions
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We are talking equity or convertible debt
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Your business is scalable and has
potential exit value as an IPO or M&A
within 3 – 5 years
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Let’s pretend we are in Sand Hill Road
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Let’s assume your company will
eventually have revenues and
profitability or a lot of users (something
we can readily measure)
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16. Some Non Financial Ways VCs
Can Value Your SME
• How much is your
team worth to
someone else (e.g.
Google, Apple, etc..)?
– Today? Next Year?
• How much is your IP
worth to someone
else?
– Today? Tomorrow?
• How Much are your
customers or
products worth to
someone else?
– Today? Tomorrow?
• How Much would it be
worth to someone to
take you out of the
market?
– Today? Tomorrow?
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17. Rule of Thumb / Shotgun Approaches
• “Standard Deals”
– E.g. one size fits all
convertible debt deals
for successful
graduates of some
incubators
– E.g. “standard terms”
for some more
established angel
groups (valuation
ranges based on
company stage)
• Local “Market” Deals
– “Angels deals Palo
Alto are typically $X
for y% of the company
in common shares”
– Same but convertible
debt at a discount to
next round with max
– Series A means…
– Series B means…
– Series C means…
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18. Financial Valuations
• Metrics Used:
• How Metrics are Used
– Your current and
future revenues
– Your current and
future profits
– Your current and
future user base
– Your current and
future asset base
– Your current and
future human base
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Revenue ratios
Earnings ratios
DCF
$ per customer
$ per engineer
Enterprise Value
PEG ratios
What else???
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19. Financial Valuations
• Revenue ratios
• $ per customer
– Price per share vs
Revenues (FTM/TTM)
• Earnings ratios
– Is there a range in
value $ per customer
• $ per engineer
– Price per share vs
Earnings (FTM/TTM)
• DCF
– How much is each
engineer worth?
• Enterprise Value
– Discounted Cashflows
– Net present value
exercise
– Equity – debt - cash
• PEG ratios
– Price earnings growth
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20. VC Valuations are
often different from
strategic, angel or
F&F methods
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21. It’s often about
COMPS COMPS
COMPS!
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22. Comparables
• VCs (along with pretty much everyone
else) can only really value you based on
how you compare to your peers (present
or future)
• Who are your peers?
• What metrics can we use to compare?
• What timelines are we talking about?
• Which market are you talking about?
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23. Comparables
• VCs rely heavily on recent comparable
transactions (especially for M&A)
• VCs rely heavily on relevant (not
necessarily just recent) public market
comparables to your company
• Different markets, countries, companies
matter a whole lot
• More art than science!!!
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24. Example IPO Exit
Valuation Exercise
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25. So Why Does Any
Of This Matter to
SMEs in Hong
Kong?
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26. Great Question
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27. Valuations Always Matter
• Aren’t we always hearing questions about
when VCs will start investing in HK?
• Valuations = Equity and Share
• Equity is expensive
• Fundamentals and the need to understand
comparables always matter
• Understanding how quickly supply and
demand for what you are, offer or have is
very important
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RGL Holdings; Jong Lee 2013

28. Open Q&A Clinic
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29. Future Clinics
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Bootstrapping HK Style
Term Sheets
NDAs
Stock Options
Shareholder & Investment Agreements
SME Loans, Grants and Programs
SME Tech Toolkit
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30. Please Fill Out the
SCC Questionaire!
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31. Questions?
Thank You
jong@rglcompanies.com
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