Venture Capital Financial Modeling: CD-Rom Featuring Detailed Insights & Interactive Spreadsheet Models in Excel on Valuations, Dilution, M&A & More

When it comes to venture capital investment, each company is unique. There is no single model that can cover all situations. The good news is that there are certain underlying, well-known concepts and methods that can be brought together into a cohesive model to help automate and improve the decision-making process in analyzing an investment. In Venture Capital Financial Modeling, Praveen Gupta, one of the top modelers in venture capital, attempts to bring these concepts together, explaining and applying them to various financial models used by venture capitalists in evaluation of their investments. The models analyzed in Venture Capital Financial Modeling provide immeasurable financial benefit to entrepreneurs and venture capitalists and will save both groups countless hours of analysis. Entrepreneurs will be better able to perform a financial analysis on their companies and get a realistic view of possible decisions by venture capitalists. Venture capitalists will be able to perform a similar analysis, resulting in smoother negotiations with educated entrepreneurs. The subjective approach to venture capital financing is not going away, mainly due to the nature of the business model. However, various financial models enable some coherent quantification of the decision-making parameters and reduce the subjectivity of decisions. Numbers and facts speak the truth, and less subjectivity will lead to a more educated and justified investment decision-making and a smoother negotiation process. All interactive financial models described in this book ? valuation modeling, dilution modeling, investment return analysis modeling, and M&A distribution modeling ? are available on the accompanying CD-ROM. These models can be adapted to individual company requirements based on the number of investors and founders by adding or removing appropriate line items. The table of contents for Venture Capital Financial Modeling includes: Chapter 1) Overview ? Venture Capital Financial Modeling Chapter 2) Valuation Modeling - Method 1: Desired Ownership - Method 2: Financial Ratios Chapter 3) Dilution Modeling - Method 1: No Adjustment - Method 2: Broad-Based Weighted Average - Method 3: Middle-of-the-Road Weighted Average - Method 4: Narrow Based Weighted Average - Method 5: Full Ratchet - Dilution Method Comparison Chapter 4) Investment Return Analysis Modeling - Initial Public Offering - Merger & Acquisition Chapter 5) Exit Analysis Modeling - Initial Public Offering - Merger & Acquisition Appendix A - Valuation Model in Excel The spreadsheets provides two general methods to value a private company: 1) Desired Ownership: This scenario is typically applicable to pre-revenue companies. Many VC?s have an internal strategy of owning certain minimum percentage of a company. Typically, it is 15-20% post funding in early stage companies. Once the investor has made the decision to invest, they have estimated the exit potential and returns for their investment. Accordingly, they have also determined the amount of investment to be made to achieve the desired returns. The investor shall typically use the amount of investment and desired ownership to determine the valuation of a private company in such scenario. 2) Financial Ratios: This scenario may typically be applied to revenue stage companies. First scenario may still be applicable either entirely or partially. A public company is typically valued in multiple ways using various financial ratios. These include Price to Earnings (PE), Price to Sales (PS), Discounted Cash Flow (DCF), Shareholder equity, or a combination of these ratios. Many of these ratios are not directly applicable to a private company due to lack of sufficient history and early revenue growth stage. Price to Sales (PS) and Price to Earnings (PE) are most applicable to such companies. Price to Earnings is generally applicable only in very late stage companies with significant revenue and profitability