153 lines
3.9 KiB
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Executable file
153 lines
3.9 KiB
Org Mode
Executable file
#+title: Section 5 | Lesson 30 - Venture Capital Part 3
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#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/business.css" />
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* Links
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- [[./../mba-main.org][TOC | Business]]
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- [[https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/learn/lecture/4311466#overview][S05:L30 Venture Capital Part 3]]
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* Notes
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** topics within the Venture Capital are relevant
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1. starting a company
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2. new division
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3. raising money
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4. potential investors
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5. creating disruptive ideas
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** we are in the third round
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- years 3-4
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- after this
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- go public
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- break up the company
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- file for chapter 11
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- sell the company
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- find your passion
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- you better be doing this because you want to
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- VCs want to work with the best management team
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** example
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- the best management team is the most important
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- P.O.C "proof of concept"
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- P.O.S. "point of sale"
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*** starting point
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10,000$ equity
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2,000,000 shares
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** first round vc
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*** company estimated:
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time: 5 years
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net income: $1mn
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*** competitor
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valuation: $20mn
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net income: $2mn
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Price / Earning = $20mn / $2mn = 10 times PE multiple.
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*** conclusion
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the competitor is worth $20mn now with a $2mn net income, leading us to believe the PE ratio is 10
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therefore if the net income is expected to be $1mn in 5 years, then the value of the company should be $10mn
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PE * net_income = Value
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10 * $1mn = $10mn
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** what is the company worth today
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- VC expects to make 50% per year
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- (Value of Company in 5 Years) / (1 + Expected Return Per Year) ^ (Number of Years)
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- $10 mn / (1 + 50%) ^ 5 = $1,316,872
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*** what does the vc get?
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- assume vc invests $1mn
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- investment / current value of company
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- $1mn / $1.32mn = 76%
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*** owner has
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- 100 - investors percentage = owners percentage
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- 100 - 76 = 24
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- owner has 24%
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*** what are the total number of shares
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- if the owner has 2 mn shares then
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- total shares = owners shares / owners percentage
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- total shares = 2mn / .24 = 8.3 mn
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- investor has 6.3 mn shares
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*** what is the share price
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- value per share = total investment / number of shares
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- value per share = $1mn / 6.3mn shares
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- value per share = 15.8c per share
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*** pre money valuation
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- what is the owners value in shares
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- this is the value before we get any investment
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- owners share * price per share
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- 2mn shares * 15.8c
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- $316k
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*** post money valuation
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- Post-money valuation = Investment Amount + Pre-money valuation
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- this is the value after the money is given by the vc
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- total number of shares * price per share
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- 8.3mn shares * 15.8c
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- $1.31m
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** second round
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- in this scenario we need a second round of investments
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- a second VC firm wants 25% for the next 2 years to invest 1mn
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- shares must be taken from the owner, because the first VC is not giving up their shares.
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*** expected return
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- Investment Amount * (1 + percentage / 100) ^ years
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- $1mn * (1.25) ^ 2 = $1.5625mn
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- expected return = $1.5625mn
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*** ownership percentage for second VC
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- Ownership Percentage = Expected Return / Expected Company Value
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- $1.5625mn / $10mn = 15.62%
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*** founder ownership
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- Founder Ownership - Second VC
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- 24 - 15.62 = 8.4%
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*** founders shares
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- Total Shares / Percentage of Company
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- 2mn / 8.4
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- 23.7 mn
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** employee shares
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we also need to set aside shares as employee incentives
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those shares will have to come out of the owners share
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*** reasons for giving stock options
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- cheaper than salary
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- motivates to work as a team
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*** conditions
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- vesting
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- you can only sell after X number of years
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- give more options every yeats
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** B round
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- if tracking better than expected
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- accelerate growth by raising more money at a higher valuation
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** VC terminology
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| Terminology | Explanation |
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|----------------------------+-----------------------|
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| Unicorn | valuation: $1 billion |
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| | probability: < 0.07% |
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| Black Holes / Walking Dead | break even |
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| | probability > 0.07% |
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