Venture Capital Valuation Method Excel Model
Originally published: 13/09/2017 12:50
Publication number: ELQ-70747-1
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Venture Capital Valuation Method Excel Model

A simple excel venture capital valuation model to understand how to value a startup at investment stage.

The Venture Capital Method assumes that a form will undertake an Initial Public Offering (IPO) at some point in the future. The future value of the firm is determined by multiplying the earnings of the firm in the year of the IPO by the expected price/earnings (P/E) ratio that the market will support. (The long-run P/E ration of NYSE stocks is about 15.) This provides the expected future value of the firm.

The present value of the firm is then calculated using a risk adjusted discount rate. Discount rates of 50 to 100% (and more) are frequently used in valuing start-up businesses to capture the inherently risky nature of new ventures. Similarly, venture capitalists frequently demand an Internal Rate of Return (IRR) of 100% (or more) in order to justify investing in a risky startup. (An IRR of 100% is equivalent to doubling an investment every year).

-> Only enter data into green-shaded cells with green type font
-> All valuation calculations fall out from these inputs

by Frank Moyes and Stephen Lawrence

Deming Center for Entrepreneurship
Graduate School fo Business Administration
University of Colorado

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1 Excel Venture Capital Valuation Model

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