Financial Model: Various Rounds of Investment Affecting Ownership, Waterfall Analysis, and IRR/Return Multiple Analysis

Excel Financial model for entrepreneurs looking to raise capital

by J. Skyler Fernandes
VC / Investing in the future innovation of retailFollow 46

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Description
First time entrepreneurs often don’t understand how ownership of their company changes with each round of capital raised and how capital is distributed to investors and founders in the event of an acquisition or liquidation. Below is a financial model that your startup can use to understand the key concepts when raising capital and whether your startup is a good candidate for venture capital (IRR’s for investors need to be at or north of 30%).

This Financial Model Demonstrates:

-> Various rounds of investment affecting ownership using pre-money and post-money valuations.

-> Raising a Seed Round: Using a Valuation Cap and/or a Discount that converts into the Series A round.

-> Waterfall Analysis: Preferred Stock Return with liquidation preferences vs. Common Stock Return.

-> Anti-Dilution Rights: How ownership changes in the event of a down round with anti-dilution protection for investors.

-> Full-Rachet Anti-Dilution vs. Weighted Average Anti-Dilution.

-> IRR / Return Multiple Analysis: Given an acquisition/liquidation, what is the financial return to investors vs. founders?

- J. Skyler Fernandes

This Best Practice includes
1 Excel Template