| A | B | C | D | E | F | G | H | I | J | K | L | M | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1 | Venture Capital Method (w/ Multiple Financing Rounds) | (?) | |||||||||||
2 | vcmethod.com | ||||||||||||
3 | |||||||||||||
4 | Exit Value | 1 | $25,000,000 | ||||||||||
5 | Number of existing shares (founders) | 2 | 1,000,000 | ||||||||||
6 | Disc Rate: | ||||||||||||
7 | Round 1 | Round 2 | Time of Exit | Year | 1 | 2 | 3 | 4 | |||||
8 | Valuation at exit | 3 | V | $25,000,000 | 12 | r | 60% | 50% | 50% | 40% | |||
9 | Compound discount rate | 4 | (1+R) | 3.60 | 1.40 | 13 | (1+r) | 1.60 | 1.50 | 1.50 | 1.40 | ||
10 | Investment amount | 5 | I | $3,000,000 | $2,000,000 | ||||||||
11 | Number of existing shares | 6 | x | 1,000,000 | 3,135,593 | ||||||||
12 | Post-Money | 7 | POST | $4,404,762 | $17,857,143 | ||||||||
13 | Pre-Money | 8 | PRE | $1,404,762 | $15,857,143 | ||||||||
14 | Ownership fraction of investors | 9 | F | 68.11% | 11.20% | ||||||||
15 | Ownership fraction of previous round | 1-F | 31.89% | 88.80% | |||||||||
16 | Number of new shares | 10 | y | 2,135,593 | 395,480 | ||||||||
17 | Total shares issued | 3,135,593 | 3,531,073 | 3,531,073 | |||||||||
18 | Price per share | 11 | p | $1.40 | $5.06 | $7.08 | |||||||
19 | |||||||||||||
20 | Entrepreneurs: | ||||||||||||
21 | Ownership shares | 1,000,000 | 1,000,000 | 1,000,000 | |||||||||
22 | Ownership percentage | 31.89% | 28.32% | 28.32% | |||||||||
23 | Wealth | $1,404,762 | $5,057,143 | $7,080,000 | |||||||||
24 | First Round: | ||||||||||||
25 | Ownership shares | 2,135,593 | 2,135,593 | 2,135,593 | |||||||||
26 | Ownership percentage | 68.11% | 60.48% | 60.48% | |||||||||
27 | Wealth | $3,000,000 | $10,800,000 | $15,120,000 | |||||||||
28 | Second Round: | ||||||||||||
29 | Ownership shares | 395,480 | 395,480 | ||||||||||
30 | Ownership percentage | 11.20% | 11.20% | ||||||||||
31 | Wealth | $2,000,000 | $2,800,000 | ||||||||||
32 | |||||||||||||
33 | Notes: | ||||||||||||
34 | 1 | Terminal Value (at time of exit) | |||||||||||
35 | 2 | Number of existing shares (owned by the entrepreneurs) | |||||||||||
36 | 3 | Valuation of company at the time of event (financing or exit) | |||||||||||
37 | 4 | The compound discount rate (1+R) is the product of the discount rates (1+r) between the time of two valuation events | |||||||||||
38 | 5 | Amount of investment per round | |||||||||||
39 | 6 | Number of existing shares (prior to financing event) | |||||||||||
40 | 7 | Post-Money Valuation: POST = V/(1+R) | |||||||||||
41 | 8 | Pre-Money Valuation: PRE = POST - I | |||||||||||
42 | 9 | Required ownership fraction for the investor: F = I / POST | |||||||||||
43 | 10 | Number of shares the investors require to achieve their desired ownership fraction: y = x[F/(1-F)] | |||||||||||
44 | 11 | Price per share: p = I / y | |||||||||||
45 | 12 | Discount rates per year. For calculating the compound discount rate (1+R). | |||||||||||
46 | V1.0 | 13 | Use the product of the discount rates (1+r) to calculate the compound discount rates (1+R) used in [4]. | ||||||||||