On 30 July 2014, George Mathew, Managing Partner at Futurebooks shared his take on the art and science of valuation for #startups. Sharing both tools used to determine the numbers as well as stories of how savvy founders determined their valuation, it was a mix of how to walk the talk and talk the walk.

1. Prepared for
Founders Drinks,e27
As of July 2014
THE ART &
SCIENCE OF
VALUATION

2. www.futurebooks.com
LAUNCH YOUR
BIG IDEA

3. www.futurebooks.com
Incorporation
structuring ,
company secretary,
work passes
Bookkeeping, financial
reports, company tax,
ESOPs
Internal
audit,
valuation
WHAT DOES
FUTUREBOOKS DO?

4. www.futurebooks.com
OKR
Objective
To explore company valuation in the Asian
context
Key Results
1. Early stage valuation – one methodology
2. Growth valuation – one methodology

5. EARLY STAGE
VALUATION

6. www.futurebooks.com
SCORECARD VALUATION
METHODOLOGY
Find relative comparatives from the same
region
AngelList is a good source
Establish an average pre-money valuation
Be conservative

7. www.futurebooks.com
SCORECARD VALUATION
METHODOLOGY

8. www.futurebooks.com
SCORECARD VALUATION
METHODOLOGY

9. www.futurebooks.com
SCORECARD VALUATION
METHODOLOGY

10. www.futurebooks.com
SCORECARD VALUATION
METHODOLOGY
Source: Bill Payne and Gust.com
COMPARISON
FACTOR
RANGE TARGET
COMPANY
FACTOR
Strength of Entrepreneur and Team 30% max 125% 0.3750
Size of the Opportunity 25% max 150% 0.3750
Product/Technology 15% max 100% 0.1500
Competitive Environment 10% max 75% 0.0750
Marketing/Sales/Partnerships 10% max 80% 0.0800
Need for Additional Investment 5% max 100% 0.0500
Other factors (great early customer feedback) 5% max 100% 0.0500
Sum 1.0750

11. www.futurebooks.com
SCORECARD VALUATION
METHODOLOGY
AVERAGE PRE-MONEY
VALUATION $3M X
FACTOR 1.0750
= 3.225

12. GROWTH
VALUATION

13. www.futurebooks.com
GROWTH
VALUATION
Credit: Aswath Damodaran
Stern School of Business, New York University

14. www.futurebooks.com
FIRM VALUE
METHODOLOGY
Cashflow forecasted
Discount rate at between 30-60%
depending on stage of company
Net present value arrived at
Terminal Value for years thereafter
Firm Value = Net Present Value + Terminal
Value (Assumes no debt)

15. www.futurebooks.com
FIRM VALUE METHODOLOGY
Terminal Value = Final Projected Year Cash Flow * (1 + Long-Term Cash Flow Growth Rate)
(Discount Rate – Long-Term Cash Flow Growth Rate)

16. www.futurebooks.com
FIRM VALUE METHODOLOGY
0.3
2014 2015 2016 2017 2018
Revenue 120,000 180,000 252,000 327,600 393,120
Growth Rate 1.5 1.4 1.3 1.2
Cashflow margin 0.6 0.6 0.6 0.6 0.6
Cashflow 72,000 108,000 151,200 196,560 235,872
Net Present Value $320,459 = NPV(0.3, Cashflows 2014-2018)
Terminal Value 2,830,464 = [Cashflow 2018 * 1,2] / [0.3 – 0.2]
Firm Value (EV) $3,150,923 = Net Present Value + Terminal Value

17. www.futurebooks.com
FIRM VALUE METHODOLOGY
0.6
2014 2015 2016 2017 2018
Revenue 120,000 180,000 252,000 327,600 393,120
Growth Rate 1.5 1.4 1.3 1.2
Cashflow margin 0.6 0.6 0.6 0.6 0.6
Cashflow 72,000 108,000 151,200 196,560 235,872
Net Present Value $176,589 = NPV(0.6, Cashflows 2014-2018)
Terminal Value 707,616 = [Cashflow 2018 * 1,2] / [0.6 – 0.2]
Firm Value (EV) $884,205 = Net Present Value + Terminal Value

18. ART OF
VALUATION

19. www.futurebooks.com
THINGS A LITTLE BIRD
TOLD ME
“Things a Little Bird Told Me:
Confessions of the Creative Mind”
by Biz Stone, the co-founder of Twitter

20. www.futurebooks.com
THINGS A LITTLE BIRD
TOLD ME

21. www.futurebooks.com
THINGS A LITTLE BIRD
TOLD ME

22. www.futurebooks.com
THINGS A LITTLE BIRD
TOLD ME

23. www.futurebooks.com
THINGS A LITTLE BIRD
TOLD ME

24. www.futurebooks.com
THINGS A LITTLE BIRD
TOLD ME

25. www.futurebooks.com
LET’S TALK
inquiry@futurebooks.com
@futureb00ks

26. www.futurebooks.com
TERMS OF USE
Restrictions on Use of Contents
1. Except as otherwise provided, the Contents of this
Document shall not be reproduced, republished, uploaded,
posted, transmitted or otherwise distributed in any way,
without the prior permission of FUTUREBOOKS
SINGAPORE PTE LTD. To use any parts of the Contents
of this Document, the user must seek permission in writing,
stating the c Contents for use; intent of use; manner of
use; time frame of use and identity of the user.
FUTUREBOOKS SINGAPORE PTE LTD reserves the right
to refuse permission without declaring reason(s); and/or if
information submitted by user is deemed insufficient.
2. You may view, download and print the Contents if:
(a) the Contents are used for non-commercial or personal
use only and will not be copied or posted on any network
computer or broadcast in any media, and
(b) no alterations, additions or modifications of the
Contents are made in any way
(c) due acknowledgement is given to “FUTUREBOOKS
SINGAPORE PTE LTD” and citing the sources for the
relevant data extracted.
3. Modification of any of the Contents or use of the
Contents for any other purpose will be a violation of
FUTUREBOOKS SINGAPORE PTE LTD ‘s copyright and
other intellectual property rights. Graphics and images on
this Document are protected by copyright and may not be
reproduced or appropriated in any manner without written
permission of FUTUREBOOKS SINGAPORE PTE LTD.
4. Any request to otherwise reproduce the Contents from
this Web Site for publication or commercial use should be
addressed to: info@futurebooks.com.sg.
Disclaimer of Warranties and Liability
5. The Contents of this Document are provided on an “as
is” basis without warranties of any kind. To the fullest
extent permitted by law, FUTUREBOOKS SINGAPORE
PTE LTD does not warrant and hereby disclaims any
warranty:
(a) as to the accuracy, correctness, reliability, timeliness,
non-infringement, title, merchantability or fitness for any
particular purpose of the Contents of this Document;
(b) that the Contents available through this Document or
any functions associated therewith will be uninterrupted or
error-free, or that defects will be corrected or that this
Document and the server is and will be free of all viruses
and/or other harmful elements.
6. FUTUREBOOKS SINGAPORE PTE LTD shall also not
be liable for any damage or loss of any kind caused as a
result (direct or indirect) of the use of the Document,
including but not limited to any damage or loss suffered as
a result of reliance on the Contents contained in or
available from the Document.