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VALUATION презентация
Содержание
- 1. VALUATION
- 2. INTRODUCTION: DUDE, DON'T FREAK
- 3. I KNOW WHAT YOU ARE SAYING…
- 4. I KNOW WHAT YOU ARE SAYING… OH GOD. ANYTHING BUT FINANCE.
- 5. BUT, SERIOUSLY. DON'T SWEAT IT. I
- 6. BUT, SERIOUSLY. DON'T SWEAT IT. I
- 7. BUT, SERIOUSLY. DON'T SWEAT IT. I
- 8. AND YOU CAN'T AVOID IT.
- 9. AND YOU CAN'T AVOID IT. BECAUSE IF YOU LOOK WEAK
- 10. AND YOU CAN'T AVOID IT. BECAUSE IF
- 11. AND YOU CAN'T AVOID IT. BECAUSE IF
- 12. SO LET'S TALK ABOUT VALUATION
- 13. SO LET'S TALK ABOUT VALUATION SINCE YOU CAN’T AVOID IT
- 14. SO LET'S TALK ABOUT VALUATION SINCE YOU
- 15. SO LET'S TALK ABOUT VALUATION SINCE IT'S
- 16. VALUATION IS THE PROCESS OF DEFINING WHAT YOUR START-UP IS WORTH! DEFINITION
- 17. DEFINITION VALUATION IS THE PROCESS OF DEFINING
- 18. DEFINITION VALUATION IS THE PROCESS OF DEFINING
- 19. DEFINITION VALUATION IS THE PROCESS OF DEFINING
- 20. DEFINITION VALUATION IS THE PROCESS OF DEFINING
- 21. LET'S GO THROUGH EACH OF THOSE…
- 22. PART 1
- 23. VALUATION BASED ON ACTUAL ASSETS IS PROBABLY THE SIMPLEST AND MOST INTUITIVE
- 24. YOU ARE WORTH EXACTLY HOW MUCH YOU
- 25. ACTUALLY, WHAT YOU’RE WORTH RIGHT NOW CAN BE DIVIDED INTO 2 MAJOR CATEGORIES OF VALUE
- 26. TANGIBLE ASSETS INTANGIBLE ASSETS INVENTORY CASH OR
- 27. SO THE FIRST THING YOU NEED TO
- 28. BUT…
- 29. YOU’LL PROBABLY ALSO HAVE SOME LIABILITIES TOO
- 30. RENTAL AGREEMENTS ACCOUNTS PAYABLE BANK LOANS
- 31. YOU NEED TO SUM UP ALL THESE LIABILITIES AS WELL
- 32. AND WHEN YOU DO THAT, YOU’RE READY
- 33. SIMPLE RIGHT?
- 34. WELL SIMPLE COMES AT A COST
- 35. OF THE 3 METHODS, THIS RESULTS IN THE LOWEST VALUATION
- 36. WHICH IS WHY, IT IS REALLY ONLY USED DURING LIQUIDATIONS
- 37. PART 2
- 38. OF COURSE THE ASSETS & LIABILITIES METHOD
- 39. BECAUSE YOU HAVE NO ASSETS
- 40. IN THAT CASE, WE NEED TO VALUE
- 41. BUT WAIT? WHY WOULD ANYONE PLACE A VALUE ON POSSIBLE FUTURE MONEY
- 42. WELL IT TURNS OUT THAT POSSIBLE FUTURE MONEY DOES HAVE VALUE
- 43. DEPENDING ON HOW POSSIBLE, AND HOW MUCH FUTURE MONEY WE’RE TALKING ABOUT
- 44. THINK OF IT THIS WAY
- 45. IF YOUR MOTHER TOLD YOU SHE’D GIVE
- 46. SURE YOU WOULD
- 47. WHAT A GOOD CHILD
- 48. YOU TRUST MOM. YOU NEED THE DOUGH TOMORROW. SO YOU’LL PAY IN ADVANCE
- 49. YOU SEE. PROMISED FUTURE MONEY DOES HAVE VALUE TODAY
- 50. HOW ABOUT IF A BANK TOLD YOU
- 51. SURE YOU WOULD
- 52. THE POINT IS THAT THERE IS DEFINITELY VALUE TODAY FOR FUTURE MONEY
- 53. HOWEVER, THERE IS A LIMIT
- 54. THE VALUE OF FUTURE MONEY AND THE VALUE OF MONEY TODAY IS NOT EQUAL
- 55. WOULD YOU PAY ME 100 DOLLARS TODAY
- 56. COME ON…YOU CAN TRUST ME. I’LL PM YOU MY BANK DETAILS
- 57. NO, OF COURSE NOT
- 58. FIRST, IF YOU DEPOSITED THE 100 BUCKS
- 59. IN OTHER WORDS, THE VALUATION OF FUTURE PROMISED MONEY IS AFFECTED BY OPPORTUNITY COST
- 60. SECOND, WHO’S TO SAY THAT I WON’T
- 61. SO NOT ONLY MUST WE CONSIDER OPPORTUNITY COSTS, WE MUST ALSO CONSIDER RISKS
- 62. IN OTHER WORDS, FUTURE PROMISED MONEY HAS
- 63. FUTURE PROMISED MONEY IS WORTH LESS THAN THE SAME MONEY RIGHT NOW.
- 64. IN OTHER WORDS, FUTURE MONEY NEEDS TO BE DISCOUNTED
- 65. FORTUNATELY, AN ARMY OF MATHEMATICIANS WORKED THEIR
- 66. INTERNAL RATE OF RETURN (IRR) AND
- 67. THESE FORMULAS LOOK AT YOUR FUTURE PROMISED
- 68. IT IS NOT ACTUALLY HARD MATH, BUT
- 69. FORTUNATELY, BILL’S BOYS IN THE MS EXCEL
- 70. THE FORMULA IS: =NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
- 71. =NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW
- 72. =NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…) GETTING FUTURE CASH FLOWS IS EASY
- 73. YOU JUST GRAB THE PROFIT (NOT REVENUE)
- 74. CHOOSING THE DISCOUNT RATE HOWEVER, IS SLIGHTLY
- 75. THE DISCOUNT RATE IS A NUMBER FROM
- 76. SO A DISCOUNT RATE OF .2 (20%)
- 77. THE DISCOUNT RATE IS ACTUALLY CALCULATED BASED
- 78. FOR EXAMPLE… =NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
- 79. RISK HOW CONFIDENT IS THE INVESTOR ABOUT
- 80. OPPORTUNITY COSTS HOW MUCH MONEY WOULD THE
- 81. MARKET NORMS THE DISCOUNT RATE WILL ALSO
- 82. HOWEVER, HERE IS MY PERSONAL INVESTING RULE
- 83. =NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
- 84. IN OTHER WORDS, IF YOU ARE USING
- 85. BECAUSE THERE IS JUST SO MUCH DAMN
- 86. AS I NEGOTIATE YOUR DISCOUNT RATE WITH
- 87. HISTORY OF STABLE GROWTH AND PROFITS
- 88. SO, BY WAY OF EXAMPLE…IMAGINE A FRESH
- 89. USING EXCEL, TODAY’S VALUE OF THIS FIRM’S
- 90. OK, THAT'S NPV LET ME
- 91. AS WE MENTIONED BEFORE, INTERNAL RATE OF
- 92. THE IRR IS THE DISCOUNT RATE THAT
- 93. AGAIN, BILL'S BOYS CAME TO THE RESCUE
- 94. IN THIS EXAMPLE, WE ASSUME THAT WE
- 95. SO….UH…WHICH DO YOU USE: IRR OR NPV?
- 96. HONESTLY, IT DEPENDS ON THE AUDIENCE USE WHATEVER THE AUDIENCE PREFERS
- 97. THAT SAID, WHILE IRR IS GREAT FOR
- 98. TO ME, IRR WORKS BEST WHEN COMPARING
- 99. IT IS GREAT FOR A BIG FIRM
- 100. BUT IMHO, IT IS NOT SO USEFUL
- 101. THERE IS ONE LAST THING I WANT TO ADD
- 102. IN AN ACQUISITION SITUATION, RATHER THAN AN
- 103. WHICH MEANS THAT PART OF THE VALUE
- 104. WHETHER THIS CAN BE ADDED TO THE
- 105. PART 3
- 106. THE FINAL METHOD OF VALUATION LEVERAGES THE WISDOM OF CROWDS
- 107. SPECIFICALLY, YOUR VALUE SHOULD BE SIMILAR TO
- 108. BASICALLY, YOUR VALUE IS THE VALUE THAT THE INVISIBLE HAND OF THE MARKET GIVES YOU
- 109. THE MOST COMMON WAY TO GUESTIMATE MARKET
- 110. AND SINCE NO COMPANY IS JUST LIKE
- 111. THIS IS USUALLY DONE WITH P/E RATIO
- 112. P/E STANDS FOR PRICE /
- 113. SO IF A FIRM’S VALUE IS 8
- 114. WE REFER TO THE VALUE OF 4 AS “THE MULTIPLE”
- 115. TO GET A VALUE FOR YOU, WE
- 116. WITH THE MULTIPLE AND YOUR PROFIT THIS YEAR, WE CAN REVERSE CALCULATE YOUR PRICE (VALUATION)
- 117. IF THE MULTIPLE IS 4 AND YOUR
- 118. THIS MAGICAL MULTIPLE IS NOT AN ABSOLUTE NUMBER OF COURSE
- 119. THE P/E RATIO CAN CHANGE DRAMATICALLY FROM
- 120. BECAUSE LIKE ANY WISDOM OF CROWDS, IT IS SENSITIVE TO MARKET SENTIMENT
- 121. AND MARKET SENTIMENT IS FICKLE, IRRATIONAL, UNINFORMED,
- 122. DURING THE DOT.COM BUBBLE, I SAW TECH
- 123. THE VALUE OF THESE COMPANIES DID NOT CHANGE
- 124. WHAT CHANGED WAS THE HYPE SURROUNDING THE MARKET
- 125. SUMMARY
- 126. THANKS FOR READING. I TOLD YOU IT WASN’T ALL THAT HARD
- 127. HERE’S WHAT YOU NEED TO REMEMBER
- 128. THERE ARE 3 WAYS TO VALUE YOUR
- 129. SHARE THIS DECK & FOLLOW ME (please-oh-please-oh-please-oh-please)
- 130. CLICK HERE FOR MORE!!!!
- 131. CREATIVE COMMONS ATTRIBUTIONS Dr. Evil: http://www.flickr.com/photos/bpage/ Attribution
INTRODUCTION: DUDE, DON'T FREAK
Слайд 6BUT, SERIOUSLY. DON'T SWEAT IT.
I KNOW WHAT YOU ARE SAYING…
OH
GOD. ANYTHING BUT FINANCE.
FINANCE IS ACTUALLY QUITE SIMPLE
Слайд 7BUT, SERIOUSLY. DON'T SWEAT IT.
I KNOW WHAT YOU ARE SAYING…
OH
GOD. ANYTHING BUT FINANCE.
FINANCE IS ACTUALLY QUITE SIMPLE
WHEN YOU FOCUS ON WHAT MATTERS.
Слайд 11AND YOU CAN'T AVOID IT.
BECAUSE IF YOU LOOK WEAK
IF YOU ACTUALLY
LET EXCEL KNOW YOU'RE SCARED
THEN YOU'LL BE ON YOUR ASS
Слайд 15SO LET'S TALK ABOUT VALUATION
SINCE IT'S NOT ACTUALLY THAT HARD
AND SINCE
IT IS ONE OF THOSE TOPICS THAT ABSATIVELY CANNOT BE DELEGATED TO FINANCE
SINCE YOU CAN’T AVOID IT
Слайд 17DEFINITION
VALUATION IS THE PROCESS OF DEFINING WHAT YOUR START-UP IS WORTH!
YOU
DO THAT IN 3 SIMPLE WAYS
Слайд 18DEFINITION
VALUATION IS THE PROCESS OF DEFINING WHAT YOUR START-UP IS WORTH!
YOU
DO THAT IN 3 SIMPLE WAYS
YOU'RE WORTH WHAT YOU OWN
Слайд 19DEFINITION
VALUATION IS THE PROCESS OF DEFINING WHAT YOUR START-UP IS WORTH!
YOU
DO THAT IN 3 SIMPLE WAYS
YOU'RE WORTH WHAT YOU OWN
YOU'RE WORTH WHAT YOU CAN EARN IN THE FUTURE
Слайд 20DEFINITION
VALUATION IS THE PROCESS OF DEFINING WHAT YOUR START-UP IS WORTH!
YOU
DO THAT IN 3 SIMPLE WAYS
YOU'RE WORTH WHAT YOU OWN
YOU'RE WORTH WHAT YOU CAN EARN IN THE FUTURE
YOU'RE WORTH WHAT THE MARKET SAYS YOU'RE WORTH
Слайд 24YOU ARE WORTH EXACTLY HOW MUCH YOU HAVE IN YOUR POCKET!
*
(ADVANCED READER: WHAT IS IN YOUR BALANCE SHEET TODAY?)
Слайд 26TANGIBLE ASSETS
INTANGIBLE ASSETS
INVENTORY
CASH OR FINANCIAL ASSETS
BUILDINGS, LAND, VEHICLES,
EQUIPMENT
COMPUTERS, DESKS,
CHAIRS (ANYTHING YOU
CAN HOCK)
ACCOUNTS RECEIVABLE
(WHAT PEOPLE OWE YOU)
AGREEMENTS THAT
COULD BE NOVATED
(FRANCHIZE OR
DISTRIBUTION
AGREEMENTS)
COMPUTERS, DESKS,
CHAIRS (ANYTHING YOU
CAN HOCK)
ACCOUNTS RECEIVABLE
(WHAT PEOPLE OWE YOU)
AGREEMENTS THAT
COULD BE NOVATED
(FRANCHIZE OR
DISTRIBUTION
AGREEMENTS)
COPYRIGHTS
PATENTS
TRADEMARKS
TRADE SECRETS
BRAND / REPUTATION
UNIQUE KNOWLEDGE
Слайд 27SO THE FIRST THING YOU NEED TO DO IS FIGURE OUT
HOW MUCH YOU CAN SELL ALL THE TANGIBLE & INTANGIBLE ASSETS FOR
Слайд 30RENTAL AGREEMENTS
ACCOUNTS PAYABLE
BANK LOANS
UNPAID SALARY
SALARY LIABILITIES (NOTICE PERIODS)
TAX OWED
BONDS
LEASES
PENSION CONTRIBUTION
PRODUCT
WARRANTIES
OTHER CONTINGENT LIABILITY
SHAREHOLDER DEBT
OTHER CONTINGENT LIABILITY
SHAREHOLDER DEBT
Слайд 32AND WHEN YOU DO THAT, YOU’RE READY TO VALUE YOUR FIRM:
FIRM
VALUE =
(TANGIBLE + INTANGIBLE ASSETS) - LIABILITIES
(TANGIBLE + INTANGIBLE ASSETS) - LIABILITIES
Слайд 38OF COURSE THE ASSETS & LIABILITIES METHOD DOES NOT WORK WELL
WHEN YOU ARE PITCHING A TRUE START-UP WHICH HAS NOTHING OTHER THAN A BIG DREAM
Слайд 45IF YOUR MOTHER TOLD YOU SHE’D GIVE YOU 20 DOLLARS TOMORROW
IF YOU DID 1 HOUR OF CHORES TODAY, WOULD YOU DO IT?
Слайд 50HOW ABOUT IF A BANK TOLD YOU THAT THEY’D GIVE YOU
A GUARANTEED 110 DOLLARS IN A MONTH IF YOU DEPOSITED 100 DOLLARS TODAY?
Слайд 58FIRST, IF YOU DEPOSITED THE 100 BUCKS IN A BANK, YOU’D
GET MORE THAN 100 BACK IN TEN YEARS BECAUSE OF INTEREST
(WELL MAYBE NOT MUCH MORE)
Слайд 65FORTUNATELY, AN ARMY OF MATHEMATICIANS WORKED THEIR MAGIC AND CAME UP
WITH A COUPLE OF NIFTY FORMULAS
Слайд 66INTERNAL RATE OF RETURN (IRR)
AND
NET PRESENT VALUE (NPV)
(ACTUALLY, IT’S
REALLY THE SAME FORMULA, JUST SOLVED FORWARDS AND BACKWARDS)
Слайд 67THESE FORMULAS LOOK AT YOUR FUTURE PROMISED CASH FLOWS, AND DISCOUNT
THEM FOR TODAY
(SOMETIMES WE CALL THIS DISCOUNTED CASH FLOW)
Слайд 68IT IS NOT ACTUALLY HARD MATH, BUT IT ISN’T EASY MATH
EITHER
(UNLESS YOU ARE FROM ANYWHERE OUTSIDE OF THE US, IN WHICH CASE, IT IS EASY)
Слайд 69FORTUNATELY, BILL’S BOYS IN THE MS EXCEL TEAM HAVE TAKEN THAT
MATH AND TRANSFORMED IT INTO A VERY SIMPLE FORMULA IN EXCEL WHICH 7 OF 9 CHIMPANZEES CAN USE
Слайд 71=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
SO, IN ORDER TO
USE MS EXCEL TO CALCULATE YOUR START-UP’S VALUE, YOU NEED TO KNOW:
WHAT IS THE DISCOUNT RATE
WHAT ARE THE FUTURE CASH FLOWS
WHAT IS THE DISCOUNT RATE
WHAT ARE THE FUTURE CASH FLOWS
Слайд 73YOU JUST GRAB THE PROFIT (NOT REVENUE) LINE FOR YOUR NEXT
5 YEARS
(YOU GET THAT IN YOUR PRO-FORMA P&L)
(YOU GET THAT IN YOUR PRO-FORMA P&L)
(NOTE FOR ADVANCED USERS: I AM NOT A FAN OF TERMINAL VALUE FOR START-UPS, SO I WON’T COVER IT HERE. I’M ALSO NOT CONSIDERING DEBT SINCE IT IS A START-UP. CORPORATE TREASURERS NEED TO READ SOMETHING MORE ADVANCED THAN THIS DECK, AS I’M SURE YOU REALIZED ALREADY)
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 74CHOOSING THE DISCOUNT RATE HOWEVER, IS SLIGHTLY HARDER
=NPV (DISCOUNT RATE, CASH
FLOW1, CASH FLOW 2,…)
(SOMETIMES PEOPLE REFER TO DISCOUNT RATE AS WEIGHTED AVERAGE COST OF CAPITAL OR WACC)
Слайд 75THE DISCOUNT RATE IS A NUMBER FROM 0 TO 1.
THE
CLOSER TO 1 YOU GET, THE MORE YOU DISCOUNT
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 76SO A DISCOUNT RATE OF .2 (20%) IS NOT VERY RISKY
AT ALL, AND A DISCOUNT RATE OF .8 (80%) IS SUPER RISKY.
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 77THE DISCOUNT RATE IS ACTUALLY CALCULATED BASED ON MANY CRITERIA
=NPV (DISCOUNT
RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 79RISK
HOW CONFIDENT IS THE INVESTOR ABOUT THE LIKELIHOOD THE PROFIT YOU
FORECASTED WILL ACTUALLY MATERIALIZE (REVENUE AND COST ASSUMPTIONS ACCURATE?)
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 80OPPORTUNITY COSTS
HOW MUCH MONEY WOULD THE INVESTOR MAKE IF SHE INVESTED
THE MONEY ELSEWHERE – ESPECIALLY IN RISK-FREE THINGS LIKE T-BILLS…AND WHAT ABOUT INFLATION…
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 81MARKET NORMS
THE DISCOUNT RATE WILL ALSO VARY FROM MARKET TO MARKET
WHERE THE WISDOM OF CROWDS HAS GENERATED RULES OF THUMB OVER THE YEARS
(IE: PHARMA RATES ARE DIFFERENT FROM E-COMMERCE PORTAL RATES)
(IE: PHARMA RATES ARE DIFFERENT FROM E-COMMERCE PORTAL RATES)
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 82HOWEVER, HERE IS MY PERSONAL INVESTING RULE OF THUMB, GENERICALLY
=NPV (DISCOUNT
RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 84IN OTHER WORDS, IF YOU ARE USING A DISCOUNT RATE OF
50% AT THE IDEA STAGE, I’M JUST NOT GOING TO BITE
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 85BECAUSE THERE IS JUST SO MUCH DAMN RISK THAT YOUR FORECASTS
WILL BE WRONG, OR YOU’LL DIE IN EXECUTION
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 86AS I NEGOTIATE YOUR DISCOUNT RATE WITH YOU, I’D ALSO BE
CONSIDERING A MOTLEY OF FACTORS…
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 87HISTORY OF STABLE GROWTH AND PROFITS
PRODUCT CYCLE POINT
SIZE MARKET
SHARE
INDUSTRY
CUSTOMER BASE -DIVERSIFICATION
GROWTH POTENTIAL-TOPLINE AND BOTTOM LINE TRENDS
COMPETITIVE POSITIONING
PRODUCT MIX
UNIQUENESS
THE VALUE OF SIMILAR COMPANIES
STRATEGY FOR CONTINUED GROWTH AND PROFITABILITY
TIMING
INDUSTRY
CUSTOMER BASE -DIVERSIFICATION
GROWTH POTENTIAL-TOPLINE AND BOTTOM LINE TRENDS
COMPETITIVE POSITIONING
PRODUCT MIX
UNIQUENESS
THE VALUE OF SIMILAR COMPANIES
STRATEGY FOR CONTINUED GROWTH AND PROFITABILITY
TIMING
Слайд 88SO, BY WAY OF EXAMPLE…IMAGINE A FRESH START-UP THAT EXPECTS TO
HAVE PROFIT OVER THE NEXT 5 YEARS OF -250,000, 0, 250,000, 2,000,000, & 10,000,000
=NPV (DISCOUNT RATE, CASH FLOW1, CASH FLOW 2,…)
Слайд 89USING EXCEL, TODAY’S VALUE OF THIS FIRM’S FUTURE, PROMISED PROFIT IS
$623,719.
THAT MEANS, IF I INVESTED $150K TODAY, I’D GET ~25% OF THE FIRM
(WHICH MEANS 2.5M RETURN IN YEAR 5 IF WE DISTRIBUTE THE YEAR 5 PROFIT AND I GET MY 25%)
THAT MEANS, IF I INVESTED $150K TODAY, I’D GET ~25% OF THE FIRM
(WHICH MEANS 2.5M RETURN IN YEAR 5 IF WE DISTRIBUTE THE YEAR 5 PROFIT AND I GET MY 25%)
Слайд 91AS WE MENTIONED BEFORE, INTERNAL RATE OF RETURN (IRR) IS LIKE
STANDING THE NPV FORMULA ON IT'S HEAD AND SHAKING IT UP AND DOWN
Слайд 92THE IRR IS THE DISCOUNT RATE THAT WOULD MAKE THE NPV
ZERO
OR, IN OTHER WORDS, THE IRR IS THE RATE OF EXPECTED GROWTH
THE HIGHER THE IRR, THE BETTER THE INVESTMENT
OR, IN OTHER WORDS, THE IRR IS THE RATE OF EXPECTED GROWTH
THE HIGHER THE IRR, THE BETTER THE INVESTMENT
Слайд 94IN THIS EXAMPLE, WE ASSUME THAT WE INVEST 150K IN A
START-UP. THE INVESTMENT LOSES 250K IN YEAR 1, BREAKS EVEN IN YEAR 2, MAKES 250K IN YEAR 3, 2M IN YEAR 4 AND EXITS IN YEAR 5 FOR 10M
GIVEN THIS, THE INVESTOR IRR IS 127.5%
IN OTHER WORDS, WE EXPECT THIS INVESTMENT TO GROW 127.5%. MUCH BETTER THAN A SAVINGS ACCOUNT!
GIVEN THIS, THE INVESTOR IRR IS 127.5%
IN OTHER WORDS, WE EXPECT THIS INVESTMENT TO GROW 127.5%. MUCH BETTER THAN A SAVINGS ACCOUNT!
Слайд 97THAT SAID, WHILE IRR IS GREAT FOR GIANT MULTI-NATIONAL FIRMS, I
PERSONALLY DON'T LIKE IT FOR START-UPS
Слайд 98TO ME, IRR WORKS BEST WHEN COMPARING PROJECTS OF EQUAL RISK
OR EQUAL COST & INCOME REALIZATION
Слайд 99IT IS GREAT FOR A BIG FIRM TRYING TO COMPARE WHETHER
TO BUILD A NEW DATA CENTER OF EXTEND THE EXISTING ONE
Слайд 100BUT IMHO, IT IS NOT SO USEFUL AT COMPARING WHETHER TO
INVEST IN A BIO-INFORMATICS START-UP OR A B2B E-COMMERCE PORTAL, 2 PROJECTS WITH SIGNIFICANTLY DIFFERENT RISK & SPEND PROFILES
Слайд 102IN AN ACQUISITION SITUATION, RATHER THAN AN INVESTOR SITUATION, HOPEFULLY THERE
IS SYNERGY VALUE BETWEEN BUYER AND SELLER
Слайд 103WHICH MEANS THAT PART OF THE VALUE OF THE DEAL IS
NOT JUST YOUR FUTURE REVENUE, BUT ALSO THE POSITIVE IMPACT ON THE BUYER’S REVENUE AS A RESULT OF THE DEAL
Слайд 104WHETHER THIS CAN BE ADDED TO THE BASE VALUATION IS UP
TO YOUR NEGOTIATION SKILLS, BUT IMHO, IT SHOULD BE FACTORED IN TO BE FAIR
Слайд 107SPECIFICALLY, YOUR VALUE SHOULD BE SIMILAR TO THE VALUE OF SIMILAR
FIRMS, IN SIMILAR INDUSTRIES, IN SIMILAR LIFE CYCLE STAGES, AT THIS POINT IN TIME
Слайд 109THE MOST COMMON WAY TO GUESTIMATE MARKET VALUE IS TO LOOK
AT COMPARABLES (SIMILAR-ISH COMPANIES TO YOURS)
Слайд 110AND SINCE NO COMPANY IS JUST LIKE YOURS, YOU NEED TO
TAKE A BUNCH OF DATA POINTS TO TRIANGULATE
Слайд 111THIS IS USUALLY DONE WITH P/E RATIO
ACTUALLY, YOU CAN SOMETIMES ALSO
CONSIDER: PRICE TO BOOK RATIO, EQUITY / SALES, EQUITY / CASH FLOW, EQUITY / PAT, EQUITY / BOOK VALUE OF SHARE. BUT PE IS FAR MORE COMMON FOR START-UPS
Слайд 112P/E STANDS FOR
PRICE / EARNINGS
(THINK OF PRICE AS SYNONYMOUS WITH
VALUATION FOR THE MOMENT)
Слайд 113SO IF A FIRM’S VALUE IS 8 MILLION AND THEIR EARNINGS
WERE 2 MILLION, THE P/E RATIO WOULD BE 4 SINCE
8 / 2 = 4
8 / 2 = 4
Слайд 115TO GET A VALUE FOR YOU, WE NEED TO USE THE
AVERAGE MULTIPLE ACROSS ALL THE COMPARABLE FIRMS WHO HAVE BEEN VALUED.
LET’S ASSUME FOR NOW, THAT THE AVERAGE MULTIPLE TURNED OUT TO BE 4
LET’S ASSUME FOR NOW, THAT THE AVERAGE MULTIPLE TURNED OUT TO BE 4
Слайд 116WITH THE MULTIPLE AND YOUR PROFIT THIS YEAR, WE CAN REVERSE
CALCULATE YOUR PRICE (VALUATION)
Слайд 117IF THE MULTIPLE IS 4
AND YOUR PROFIT WAS 500K, THEN YOUR
VALUATION IS 2 MILLION
PRICE / EARNINGS = MULTIPLE
PRICE = MULTIPLE X EARNINGS
2M = 4 X 500K
PRICE / EARNINGS = MULTIPLE
PRICE = MULTIPLE X EARNINGS
2M = 4 X 500K
Слайд 119THE P/E RATIO CAN CHANGE DRAMATICALLY FROM INDUSTRY TO INDUSTRY AND
IT CAN CHANGE IN THE SAME INDUSTRY OVER TIME
Слайд 121AND MARKET SENTIMENT IS FICKLE, IRRATIONAL, UNINFORMED, AND FULL OF EMOTIONS
*(HEY
CLASSICAL ECONOMICS…YOU CAN KISS MY A
Слайд 122DURING THE DOT.COM BUBBLE, I SAW TECH VALUATIONS OF 15X IN
ASIA. WHEREAS TODAY, TECH VALUATIONS ARE CLOSER TO 4X
Слайд 128THERE ARE 3 WAYS TO VALUE YOUR FIRM:
WHAT YOU OWN (USE
ASSETS – LIABILITIES) – USED FOR LIQUIDATION
WHAT YOU’LL EARN IN THE FUTURE (USE NET PRESENT VALUE) – USED FOR INVESTMENT
WHAT THE MARKET SAYS (USE P/E RATIO) – USED FOR ACQUISITIONS
WHAT YOU’LL EARN IN THE FUTURE (USE NET PRESENT VALUE) – USED FOR INVESTMENT
WHAT THE MARKET SAYS (USE P/E RATIO) – USED FOR ACQUISITIONS
Слайд 129SHARE THIS DECK & FOLLOW ME
(please-oh-please-oh-please-oh-please)
stay up to date with my
future slideshare posts
http://www.slideshare.net/selenasol/presentations
https://twitter.com/eric_tachibana
http://www.linkedin.com/pub/eric-tachibana/0/33/b53
Слайд 131CREATIVE COMMONS ATTRIBUTIONS
Dr. Evil: http://www.flickr.com/photos/bpage/
Attribution Slide: http://www.flickr.com/photos/21572939@N03/
Please note that all content
& opinions expressed in this deck are my own and don’t necessarily represent the position of my current, or any previous, employers
