Last version published: 13/01/2017 11:50
Publication number: ELQ-29706-2
View all versions & Certificate
Startup Valuation VC Method + excel Spreadsheet
Excel template made to understand how VCs value the money that will be used to invest in a startup
For a great start up, you want a great start up valuation. For that reason, you have to understand how VCs work when they value companies. Hence, this tool firstly utilizes a startup valuation method which they modestly called the VC method.
1. The startup Valuation VC Method: What is it?
The VC method helps you understand how VCs value the money they are about to invest in your startup.
Basically let’s say that one VC imagines that he should at least double the value of its investment every year (in other words: that means +100% each year). As he knows that your startup will probably not be sold in one year time, the VC will begin to think in three years time (technically saying, when you will sell your startup to Google).
To do that, he takes your financial projections (or his financial projections, if he figures that your figures are grossly overestimated) and he multiplies your year-3 figures by a selected multiple. He then calls that the EXIT value.
Your year 3 turnover is estimated at USD 100 m. The VC will imagine that at this time he will be able to sell your startup for 10 times the turnover to Google. He then values your startup (In year 3) at a whooping USD 1 billion.
Impressive. Considering that it is actually in 3 years time.
Also, remember he wants to double the initial investment every year. That’s where the infamous discount rate comes in. The VC will then do a backward valuation and say : “If year 3 valuation is USD 1bn, that means that year 2 valuation should be USD 500m, year 1 startup valuation should be USD 250m and year 0 valuation should then be USD 125m once I have put my money”
So if we are on year 0, you ask for a USD 25m to the VC he will then tell you : “OK, I will give you USD 25m in exchange for 20% of your company (25/125)”. Simple, right? (and the good news is that you still have 80% of the billion (Remember, in 3 years…).
However, this has been condensed into 3 points:
1/ The Exit value and the exit multiple: what the VC thinks the company will be valued at when it is sold (generally a multiple of something like turnover, EBITDA, EBT etc…).
2/ The discount rate: the rate of growth the VC is expecting on his investment (generally varies from 20% to 100% depending on maturity of company, quality of management, competition etc.)
The postmoney valuation : your present startup valuation including the money of the investor.
However, if you do not want to bother, please visit seriousfunding.be and they will do the work for you.
You can quickly test your startup valuation using the excel available for download below.
- Raphaël Abou, 15 april 2016
(Raphaël Abou is the founder and the Chief Funding officer of Serious Funding)
This business tool includes
1 Excel Model
Serious Funding offers you this business tool for free!
download for free
Add to bookmarks
To determine the value of your startup, using the VC method.
- victor kunle david(last updated: 16/11/2018 17:01)
- Winnie (Wenting) Shi(last updated: 12/11/2018 06:50)
- Judith Riann Fernandez(last updated: 08/11/2018 01:30)
- Wilfried de Renty(last updated: 03/11/2018 18:41)
- Abdul Nazeer(last updated: 02/11/2018 17:51)
- Suunil Sahdev(last updated: 02/11/2018 09:23)
- Michael liu(last updated: 28/10/2018 17:18)
- George Frank(last updated: 25/10/2018 19:08)
- Sazal Hazra(last updated: 25/10/2018 06:34)
- Roger Mann(last updated: 22/10/2018 16:30)
- Kristofer Ng(last updated: 20/10/2018 11:10)
- Vipin Chopra(last updated: 20/10/2018 05:28)
- Eric Williamson(last updated: 17/10/2018 16:19)
- aggi nauval(last updated: 16/10/2018 04:49)
- Ruth Brennan(last updated: 12/10/2018 16:39)
- Nathan LE(last updated: 11/10/2018 15:22)
- mainguyen(last updated: 09/10/2018 01:48)
- arief febrianto(last updated: 28/09/2018 05:45)
- Ramzi Qasmieh(last updated: 27/09/2018 08:53)
- Tapan Kumar Das(last updated: 25/09/2018 03:13)
- Sandip Modha(last updated: 19/09/2018 20:34)
- John S. Chalkiopoulos(last updated: 18/09/2018 03:52)
- Juan Felipe Mosquera Buitrago(last updated: 16/09/2018 18:21)
- Fauziah Muchlis(last updated: 16/09/2018 10:20)
- Sukanya Ghosh(last updated: 12/09/2018 20:28)
- Jason Rusli(last updated: 11/09/2018 08:27)
- Yue(Amy) Su(last updated: 10/09/2018 03:00)
- guangquan liu(last updated: 04/09/2018 09:33)
- Yatish Srivastav(last updated: 28/08/2018 23:24)This is a rip-off. Do not download.
- Taychang Wang(last updated: 26/08/2018 08:06)
People using this tool also downloaded
S3 Cap Table TemplateA cap table file to help entrepreneurs structure and understand their financing rounds and increase their performancevaluationfinancingstartupsventure capitalraising capitalseries acap tableseries bownershipshareholders3,585 remove_red_eye
Startup Financial Model TemplateA simple financial model for an early-stage startup/anyone building a model for a companyfinancefinancial modelentrepreneurshipstartupsearly-stageend-to-endstandard financial statementsventure capitalkey operating metricsraising capital5,910 remove_red_eyefreeby David Teten
S3's Operating Model TemplatePrecise calculator for business expenses, overall cash needs and revenue model.financestartupsearly-stageventure capitalraising capitaloperationsbusiness expensesrevenue modelbusiness kpiscash needs2,312 remove_red_eye
VC Venture Capital Term Sheet Template - NVCA ModelA Series A Preferred Stock VC Term Sheet Templatefundraisingstartupsventure capitalseries ainvestingterm sheetpreferred stock1,049 remove_red_eyefreeby NVCA
Venture Capital Valuation Method Excel ModelA simple excel venture capital valuation model to understand how to value a startup at investment stage.valuationstartupventure capitalinvestingvc method604 remove_red_eye
Liquidation Model - Waterfall AnalysisEducate employees, founders, and others in how liquidation preferences affect financial distribution in exit scenariosfinancestartupsventure capitalraising capitalliquidation preferencesfinancial distributionventuresexitsliquidation modelwaterfall analysis2,653 remove_red_eye
Cap Table Excel ModelAn Excel Cap Table and Exit Waterfall for Entrepreneursvaluationstartupsventure capitalcap tablecapitalizationexit waterfallexit analysiscapitalization table6,682 remove_red_eye
Early Stage SaaS Financial ModelGet up to speed on a SaaS Financial Model with a template and its step by step instructionsfinancefinancial modelentrepreneurshipstartupsearly-stageraising capitalbusiness modelingsaasseedseries a4,034 remove_red_eye
Freemium Business ModelCustomize a ready-made financial model for your Freemium Web Services Businessfinancemodelingfinancial modelstartupsventure capitalraising capitalfreemiumuser acquisitionuser activationentrepreneur3,199 remove_red_eye
Note Discount Cap WorksheetDiscount or cap? A spreadsheet that shows what happens when a note converts.financevaluationdiscountventure capitalraising capitalseries aoption poolcapconvertible noteterms338 remove_red_eyefreeby Raji Bedi
Startup Financial Plan TemplateOngoing document made to guide you in running your business, when in need of funding or financing.planinvestmentfinancialmodelstartuptemplatefundingfinancial forecastongoingdocument1,223 remove_red_eye
Term Sheet Series A TemplateGuidance for founders negotiating Series A funding.fundraisingseries ainvestingvcangel investorsterm sheet821 remove_red_eye
Startup Pitch Deck TemplateThis will help you make a compelling pitch deck that will generate excitement from investors.investorsfundraisingpowerpointpitchingpitchdeckslides313 remove_red_eye
Any questions on Startup Valuation VC Method + Excel Spreadsheet?
The user community and author are here to help. Go ahead!