Financing in the start-up phase in Switzerland »venture» 2014, Founder's Knowledge Seminar – Financing covers financing in the start-up phase, including financial planning, due diligence and selection criteria usually applied by investors. We also included a tutorial on some of the financial valuation approaches. »venture» 2014 is a Swiss business plan competition to supports young entrepreneurs. It is an initiative of the ETH Zurich, Knecht Holding, the Swiss innovation promotion agency CTI and McKinsey & Company. A3 Angels is a mentoring and seed investment club founded in 2008 by Alumni of the Federal Institute of Technology EPFL to help support startups in Switzerland. Over 30 companies have benefited from this support.

1. Claude Florin, A3 Angels
Financing in the startup phase
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2. Outline





Start Up Stages and Financing Requirements
Business Angels and Venture Capital
Company Valuation
Equity Share, Dilution & Exiting
Getting started
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3. Start Up and Funding Stages
Entrepreneurs and investors perspectives
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4. Revenue / EBITDA
Funding sources
Grants
Crowd
funding
BA network
syndication
Business
Angels
> CHF 50M/year in CH
Banks
Venture
Capital
> CHF 100M/year in CH
Source: EBAN, BBAA NESTA-BBAA “Siding with the Angels”- 2009
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5. What Type is your Start-up ?
CHF1 B
CHF500M
CHF100M
Annual Sales
CHF50M
CHF10M
CHF5M
 Acquisition
 Venture capital
 Strategic partner
 Business Angels
 Grants
 FFF
CHF1M
“Investable” business
 Born to be big
 Born to Flip
 Driven to make a
difference
“Life-style” business
 Work to feed the family
 Work to live their
passion
 Social startups
 Bootstrap
 Self-funded
Adapted from Newwork LLC
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6. Funding stages and amounts
Seed
Startup
Efficiency
Pre-Seed
0.5M
Banks
Acquisition
Venture capital
Testing required
9000
6000
3000
50-150k
0
100k, 300k +
50-150k
FFF
www.venture.ch
10-50 M+
0.5 – 10 M+
Grants
Adapted from Neworks, LLC;
VC funding
$M
1M, 5M+
Angel
Self-funded
x % assets
+ y % A/R
Special funds
Strategic partner
Bootstrap
Investment (CHF)
Alternative product
30-60% margins
10-50k
Startup Genome, Silicon Valley investments
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7. Business Angels
and Venture Capital
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8. Early-stage investment motivation
Institutional investors
 VCs : return on investment to investors
 Corporate VCs : strategic business development
Business Angels :
 Return on Investment is the metric
 Staying involved (sense of usefulness)
 Give back to community
 Affection for entrepreneurs
Includes
altruistic
motivations
Source: Bill Payne
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9. Early-stage investment in Switzerland
(M CHF)
300.0
250.0
+40%
200.0
50M
-50%
150.0
130M
100.0
50.0
0.0
2007
2008
VC start-up
(growth)
2009
VC seed
2010
2011
Business Angels
Source: EVCA/PEREP Analytics, conversion €=1.22 CHF / EBAN 2007-2008 / CTI for 2013, A3 Angels 2009-2012
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2012

10. Swiss Business Angels
Networks and members
Networks
BA Investment per capita
CHF / hab
15
10
5
0
> 300 investors
>30-50 million CHF / year
>40 funded startups / year
Multi-disciplinary
€ M/ M
Source : A3 Angels ; Nelson Gray, EBAN
www.venture.ch
# deals/ M
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11. Financing and entrepreunarial risks
Survival rate US ~40%
Survival rate EU ~40%
US Bureau of Labor Statistics, TechStars, Y Combinator. Quoted by Mars data accelerator
http://data.marsdd.com/accelerators-worth-the-hype/#sthash.cXov6K8B.dpuf
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12. Investment portfolio model
Portfolio Multiple
Company
5-Year
IRR
Portfolio Multiple
Company
5-Year
IRR
1
0.0
0%
6
1.6
10%
2
0.0
0%
7
1.6
10%
3
0.0
0%
8
7.6
50%
4
1.3
5%
9
20.0
82%
5
1.3
5%
10
Unknown
Unknown
Return on Portfolio Investments (1-9) is 3.7X = 26% IRR over 5 Years
Assuming survival rate of 60% and 1 big success – reality is often lower
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13. Internal rate of return (IRR)
IRR %
1
2
3
4
5
6
7
1
Years
3
4
5
2
6
Multiple
7
Years
1
2
3
4
5
6
7
-
-
-
-
-
0%
1.00 1.00 1.00 1.00 1.00 1.00 1.00
100
41
26
19
15
12
10
5%
1.05 1.10 1.16 1.22 1.28 1.34 1.41
200
73
44
32
25
20
17
300
100
59
41
32
26
22
10%
1.10 1.21 1.33 1.46 1.61 1.77 1.95
400
124
71
50
38
31
26
15%
1.15 1.32 1.52 1.75 2.01 2.31 2.66
500
145
82
57
43
35
29
20%
1.20 1.44 1.73 2.07 2.49 2.99 3.58
600
165
91
63
48
38
32
25%
1.25 1.56 1.95 2.44 3.05 3.81 4.77
1.30 1.69 2.20 2.86 3.71 4.83 6.27
35%
1.35 1.82 2.46 3.32 4.48 6.05 8.17
40%
1.40 1.96 2.74 3.84 5.38 7.53 10.5
IRR %
-
30%
Multiple
-
.xls function
= IRR(values, guess)
e.g.: IRR(D1:D:60,0.3/12) monthly or annual compounding
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14. Understanding VCs
Who are VCs?
 Business managers and entrepreneurs turned fund
managers; professional investors
What do VCs do?
 Invest “other peoples money”
 Analyze hundreds of potential investments
 Choose only a few per year
 After investing, VCs become active in the venture
– take seat on the Board of Directors
– some take interim executive management positions
– get involved in strategic planning or oversight
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15. AT
BE
BG
CH
CY
CZ
DE
DK
EE
EL
ES
FI
FR
HU
IE
IT
LT
LU
LV
MT
NL
PL
PT
RO
SE
SI
SK
UK
100.0
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1.3
0.0
5.2
15.4
0.0
4.3
3.0
0.4
0.0
103.2
84.8
55.9
63.8
56.3
300.0
273.9
354.7
400.0
50.3
8.7
0.0
69.9
65.3
130.0
200.0
0.0
0.1
29.5
60.7
0.1
million €
500.0
477.0
VC investments in seed and start-up
M€ EU countries data; 2012
600.0
0.0
Source : EVCA
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16. VC + BA model today
“Tougher times for VCs”
CHF 100K
Founders
+FFF
+ Grants
Start
CHF <2M
@ CHF 1-2M
Business
Angels
+ Loans
>6 mo
CHF 1-2M
@ <CHF 5M
VC + BAs
0.5-5X
multiple
CHF >2M
@ >CHF 5M
VC B
>12 mo
 Increased financing
requirements
 European VCs struggling to
raise new funds
 Stronger BA co-investment
…
Trade sale
IPO
>3 year
>8 year
 Decreasing exit valuations
 Limited trade sale
opportunities
 Closed IPO markets
 Longer cycles before exit
Source : Diego Braguglia, CTI Start-UP, Angel Days 2012
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17. VC-funded exits : only few succeed
25’000
funded
6’400 exit
1:4
980 >€ 100M
wins
1:26
35 >€1B
winners
1:700
Other
wins
23%
Winners
77%
€ 290B exit
value
Source: Quilvest, 2000-2010 quoted by Jean-David Chamboredon, ISAI
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18. Company Valuation
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19. Valuation outline
The background
 Alignment of investors and founders
 Different perspectives
The numbers !!
 Current early-stage financing trends
 Business Angels methods for Seed valuation
The Math ….
 Comparables, Sales Multiple
 Discounted Cash Flow
 Product Assets, Replacement Value
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20. The two perspectives
 Align investors with entrepreneurs
(drives the subsequent scalability of the business)
 Roadmap and targets for investor
 Provides incentives for entrepreneurs
Motivation
and control of
Founders
www.venture.ch
Valuation based on
experience and intuition
Risk / reward
of Business
Investors
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21. Capital
payment
Investor‘s
return
Dividends
+ capital
„Venture Capital “
method
„BA“ methods
www.venture.ch
Cash
Outflow
Cash
Inflow
Operating
costs
Operating
revenues
expenses
earnings
Customers
Investor‘s
expenses
Company
Investor
Investor and Company views
•Discounted cash-flow ,
•Multiples (comparables)
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22. The Maths – Methods of Valuation
Market
data
Market
cap,
similar
in the
market
www.venture.ch
VC methods,
Business
Angels
empirical
ratios
Performance
based
Multiples
financial
indices
EBIT, …
Net
assets,
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Discounted
Cash-Flow
(DCF)
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23. Valuation trends
Europe $ 2.6M
USA $ 2.75
 Switzerland average= $4.2 M
 50% = $1.5 - $8 M
 Business Angels :
 Western EU average= $2.6 M
 50% = $1.2 - $3.5 M
– Median valuation = $2.75 M
– Two-thirds $1.0 - $3.0 M
– 50% = $1.5 - $3.6 M
 VC median = $15M
<1M
1M 2M 3M 4M
5M 6M
7M+
1Q’12 1Q’12
1Q’12 1Q’12 1Q’13
Source : Bill Payne, Angel List, Halo report,
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24. Business Angels methods
Bill Payne
Worksheet
Management team 0-30% 25-40%
Size of opportunity
0-25% 20-30%
Product & technology 0-15% 10-30%
Sales channels
0-10% 5-20%
Competitive advantage 0-10% 5-20%
Size of this round
0 - 5% 0-5%
Need for funding
0 - 5% 0-5%
Don’t make product/technology
95%
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25. BA Methods : worksheet
0-30% Strength of Management Team
What is founder’s experience?
Many years business experience
Experience in this business sector
Experience as a CEO
Experience as a COO, CTO, CFO
Experience as a product manager
Experience only as a salesperson of technologist
Straight out of school
Is the founder willing to step aside, if necessary, for a
Impact
new CEO?
deal killer Unwilling
Difficult to convince
0
Neutral
+
Willing
++
Key part of the plan
Impact
Is the founder coachable?
0
Yes
deal killer No
Impact
How complete is the management team?
-Very incomplete (none identified)
Somewhat incomplete
0 Good start
+
Rather complete team
++
A complete and experienced management team
0-15% Competitive Landscape
Impact
0
+
++
+++
Impact
-0
+
++
Impact
--
Impact
+
++
+++
++
+
--
+
++
0-10%
Impact
-0
+
+++
0-10%
Impact
-0
++
+++
0-25% Size of the Opportunity
-
What size is the specific market for the company’s
Impact
product/service?
deal killer <CHF50,000,000
0
CHF100,000,000
++
>CHF500,000,000
Impact
What is the potential for revenues in five years?
<CHF30,000,000
0
CHF50,000,000
++
>CHF100,000,000
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0-10%
Impact
++
+
0
What is the status of the IP (intellectual property)?
Trade secrets only
Core patents pending
Core patents issued
Complete patent estate
What is the strength of competitors in this market?
Very strong
Strong
Fragmented
Weak
Very weak
How large are the barriers to entry?
Very low
Low
0 Modest
High
Very high
Sales Channels
What channels of sales are in place?
Haven’t even considered
Many possibilities identified
Narrowed to one or two channels
Initial channels verified
Channels established
Business Stage
In what stage of business is the company?
Only have a plan
Writing code/in product development
Product ready for customer evaluation
Positive, verifiable customer acceptance by beta site
Customer lined up
Funding Required
What amount of funding is required?
CHF250,000 to CHF750,000
CHF750,000 to CHF1,500,000
CHF1,500,000 to CHF20,000,000 (depends on availability of VC capital
in region)
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26. Business Angel methods
Berkus Method
Sound idea
Prototype
Quality mgt team
Quality board
Any roll-out, sales
Value Range:
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Meier Method
CHF 0.5 Mio.
+ CHF 0.5 Mio.
+ CHF 1-2 M.
+ CHF 0.5 Mio.
+ CHF 0.5 Mio.
CHF 1 - 6 Mio.
1 Manager
2 Managers
Value Range:
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CHF 1.5 Mio.
+ CHF 1.5 Mio.
CHF 1.5 - 6 Mio.

27. Discounted cash flow (DCF)
Discounted by
capital costs
Company Value
= Sum of discounted FCF
+ discounted CV
0
1
2
3
CV
Continuing Value
4 5∞
t
Discount (WACC)
CAPM
Seed stage
70-100%
4-14%
Start-up stage
50-70%
4-14%
First stage
50-70%
Second stage
35-50%
Later stage
25-40%
Stage
Source: Patrick Frei & Benoît Leleux ; Jean-Pierre Vuilleumier, Angel Days
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28. DCF valuation issues
 DCF is not a suitable method to value start-ups
–Valuation >80%derived from Continuing Value
–Cumulated FCF negative for planning period
–Cost of capital hard to estimate (>40 %)
–Discount rates too low ⇒ valuations too high
 Helps analyze company’s value drivers
Source : Jean-Pierre Vuilleumier, Angel Day 2013
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29. Comparable ratios “multiples”
P&L
Turnover
- material expenses
- personnel expenses
- other operating expenses
= operative cash flow
- Depreciation
= result of operations
Ratio
Revenue
EBITDA
- Net interest paid
= EBIT
- Tax
= annual surplus / annual loss
 Valuation ≈
1X revenue
EBIT
 Valuation ≈
5X EBIT
Net Income
EBIT = earnings before interest, taxes, depreciation and amortization
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30. Comparable ratios
Industry
Biotechnology
Communications Equipment
Computer Hardware
Consumer Electronics
Consumer Finance
Electronic Components
Electronic Equipment and Instruments
Health Care Technology
Home Entertainment Software
Integrated Telecommunication Services
Internet Retail
Internet Software and Services
Semiconductor Equipment
Semiconductors
Systems Software
Business software
Application software
Wireless Telecommunication Services
EV/EBITDA*
NA
5.33
4.91
3.44
42.67
3.70
5.62
5.51
4.17
5.17
13.73
8.03
4.65
6.31
6.27
EV/EBIT*
NA
7.75
7.40
6.35
49.19
6.39
8.01
10.45
31.04
10.28
18.41
22.55
6.37
NA
8.90
EV/Revenue**
4
2.4
2.6
3
6.61
12.17
Source: Damodoran on-line (Europe * ), http://startupvaluation.com (USA **)
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31. Adjust valuation using “multiples”
Today
Actual
Projected
sales (earnings)
What “multiple” would you buy these
businesses?
B
A
C
F
G
time
D
E
© 2004-2010 Neworks, LLC
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32. Every method gives a different valuation
 Often over estimates real value
 Uncertain assumptions
 Not applicable for growth
companies
 Simple– no negative numbers
 Time value not considered
 Just a high-level forecast
15%
6,135
4,048
2,766
1,926
1,351
EBIT-Multiple
35%
40%
45%
50%
55%
annual growth of the residual value
8%
10%
4,850
5,144
3,351
3,517
2,359
2,458
1,675
1,737
1,190
1,230
turnover multip
Multiples
risk ratio
Discounted Cash-Flow
0.5
1.0
1.5
2.0
2.5
year
2011
0
0
0
0
0
2012
250
500
750
1,000
1,250
5.0
6.0
7.0
8.0
9.0
year
2011
neg.
neg.
neg.
neg.
neg.
2012
neg.
neg.
neg.
neg.
neg.
Source : A3 Angels
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2013 2014 2015
1,000 2,500 5,000
2,000 5,000 10,000
3,000 7,500 15,000
4,000 10,000 20,000
5,000 12,500 25,000
2013
neg.
neg.
neg.
neg.
neg.
2014
2,500
3,000
3,500
4,000
4,500
2015
10,000
12,000
14,000
16,000
18,000
2016
10,000
20,000
30,000
40,000
50,000
2016
25,000
30,000
35,000
40,000
45,000

33. Need to adjust valuation for Debt
Assets
capital assets
Liabilities
Equity
Equity market value
(number of shares X share price)
+
working capital
(assets)
liquid assets
www.venture.ch
Debt
working capital
(liabilities)
Net Debt
(+ net interest bearing financial
liabilities – liquid assets )
=
Enterprise Value
(adjusted market value)
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34. Valuation: VC method
Investor’s View
(Venture Capital Method)
IRR (Internal rate of return)
Sum discounted CF = 0
Value
1
2
3
4
5 6
t
 Define the target Internal Rate of Return (IRR)
 Estimate capital requirement (FCF analysis)
 Estimate time to exit (5-7 years)
 Estimate exit value (transactions or multiples)
  Backward calculation of the required share
Source : Jean-Pierre Vuilleumier, Angel Days 2012 © CTI -Invest
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35. Venture Capital Method
Method
Specification of required IRR
 Rate of return objective,
e.g. 30%.
or
 Target multiple of the investment
e.g. 7.5X
Evaluation of exit
 Time
 Anticipated valuation at exit
e.g. 25’000
Required share of equity
Investment
targeted return (7.5 X)
500
3,750
share of the Business Angels
valuation in Seed financing round
15%
3,333
total proceeds at exit
- return preference of VCs
return at pro rata allocation
return share of Business Angels
Source : A3 Angels
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27,500
2,500
25,000
3,750

36. On-line tools for startup comparison
Equidam
Equitynet
Worthworm
Source : http://www.equidam.com/ : https://www.equitynet.com/crowdfunding-tools/startup-valuation-calculator.aspx ; www.worthworm.com
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37. Equity Share, Dilution &
Exiting
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38. Definitions : pre / post money valuations
Company stage
Entrepreneur ownership
Seed investor ownership for CHF 250K
Pre-Seed
100%
Seed
A-round
B-round
80%
64%
51%
20%
16%
13%
20%
16%
A-round investor ownership for CHF 1M
B-round investor ownership for CHF 3M
20%
Pre-money valuation
CHF 1M
CHF 4M
CHF 12M
Post money valuation
CHF 1.25M
CHF 5M
CHF 15M
Entrepreneur value
CHF 1M
CHF 3.2M CHF 7.7M
Dramatic increase in the value of the company and value of your share
The relevant question is not “how much of the pie do I own?”
rather “how big is the pie?”
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39. Dilution and returns at Exit
Company stage
Investment Ownership Value
Multiple
Entrepreneur ownership
-
51.2%
CHF 26M
-
Seed investor ownership
CHF 250K
12.8%
CHF 6M
26X
A-round investor ownership
CHF 1M
16%
CHF 8M
8X
B-round investor ownership
CHF 3M
20%
CHF 10M
3X
CHF 4.25M
100%
CHF 50M
-
Total
•No investors subsequent to Round B
• 7 years after seed investment, Company acquired for CHF50M
•Seed Investor’s IRR is ~60%
• Depending on time of investment, Round A & B investors likely IRR 30-50%
• Everyone happy!
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40. Valuation & Dilution scenario
The hypothetical high-tech start-up company
Dilution of ownership and Increase in Valuation from idea through cash-flow positive company.
Time zero
The beginning
At founding
Valuation
pre-money
investment
post-money
Share price (rounded)
Authorized shares
Common
$500,000
$
100.0%
0.27
6-12 months
Milestone 1
Pre-seed round
$ 750,000
$ 150,000
$ 900,000
$
10,000,000
83.3%
16.7%
100.0%
0.40
Year 1
$ 1,500,000
$
500,000
$ 2,000,000
$
10,000,000
Year 2 or 3
Milestone 3
VC Round A
Milestone 2
Seed round
75.0%
25.0%
100.0%
0.67
$
10,000,000
93,750
1,781,250
5.0%
95.0%
93,750
1,781,250
375,000
4%
79%
16.7%
93,750
1,781,250
375,000
750,000
3%
59%
12.5%
25.0%
1,875,000
100.0%
2,250,000
100.0%
3,000,000
100.0%
Value of holdings
UniversityInventors
Founders
Pre-seed investors
Seed investors
VC round A investors
VC round B investors
Total
$25,000
$475,000
$0
$0
$0
$0
$500,000
Deliverables
at the end
of the stage:
Small team
Plan
Family collateral
IP assessment
License
Tech transfer
Seed collateral
60.0%
40.0%
100.0%
1.00
$ 10,000,000
$ 5,000,000
$ 15,000,000
$
$62,500
$1,187,500
$250,000
$500,000
$0
$0
$2,000,000
Space
A few key milestones
(Prototype, market indicators)
VC collateral
93,750
1,781,250
375,000
750,000
2,000,000
5,000,000
93,750
1,781,250
375,000
750,000
2,000,000
2,500,000
7,500,000
100.0%
$93,750
$1,781,250
$375,000
$750,000
$2,000,000
$0
$5,000,000
100.0%
7.47
10,000,000
1.3%
23.8%
5.0%
10.0%
26.7%
33.3%
100.0%
$187,500
$3,562,500
$750,000
$1,500,000
$4,000,000
$5,000,000
$15,000,000
The remaining
key milestones
OEM partner collateral
$56,000,000
$
10,000,000
1.9%
35.6%
7.5%
15.0%
40.0%
Seven to ten years later
Milestone 5
"Peak Sales"
66.7%
33.3%
100.0%
2.00
10,000,000
Issued shares
University/Inventors
Founders
Pre-seed investors
Seed investors
VC round A investors
VC round B investors
Total
$37,500
$712,500
$150,000
$0
$0
$0
$900,000
$ 3,000,000
$ 2,000,000
$ 5,000,000
Year 3 or 5
Milestone 4
VC Round B
Design freeze
Manuf'g scale up
Market'g & Sales ready
Distribution
93,750
1,781,250
375,000
750,000
2,000,000
2,500,000
7,500,000
1.3%
23.8%
5.0%
10.0%
26.7%
33.3%
100.0%
$700,000
$13,300,000
$2,800,000
$5,600,000
$14,933,333
$18,666,667
$56,000,000
4 or 5 years of sales growth:
Sales of $30 M
Earnings of $7 M
8 x Earnings multiplier
Adapted from Neworks, LLC
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41. How to maximize value
 Target equity at exit is not  The name of the game …
a function of initial equity
is not to minimize dilution
stake but the reflects of the at each stage of a
company strategy
company’s existence
 Equity at exit depends on:
–
–
–
–
Technology success,
Negotiation power,
Market,
Competition.
Source : Diego Braguglia, CTI Start-UP, Angel Days 2012
www.venture.ch
 But to maximize the value
of your share at the end of
the process.
Harvard Business School, Financing Entrepreneurial Ventures
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42. Creative Negotiations
Let the Market Set Price
 Take “convertible note”
 Offer anti-dilution clauses
Performance Based Valuations
 If pre-determined milestones achieved, valuation is
CHF xM
 If not, valuation is CHF yM
Offset high valuation with preference
 Preferred shares with liquidation preference
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43. Convertible Loan
 Subordinated convertible loan
–Mandatory conversion upon equity round
–Same terms as equity round with x% discount
 Avoids valuation when
–company is young
–fair valuation difficult
–Bridge loan required
 Easy to implement
 Generally not well received by future equity
investor
Source : Peter Pfister, Angel Day 2013
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44. Anti-Dilution Provisions
 Principle:
–Shareholders agreement clause
–In case of a down round the dilution is
absorbed by the founders (Common
Shareholders).
 Several ways to calculate (full rachet, weighted
average)
 Adds responsibility on the founders to create
value
Source : Peter Pfister, Angel Day 2013
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45. Liquidation Preference
 Principle:
– Shareholders agreement exit
clause :
– Preferred Shareholders =
investors
– Get paid x times (usually 1X )
investment before other
payouts.
 Improves returns
 Saves a % of investment in
case of failure
 A question of fairness
Source : Peter Pfister, Angel Day 2013
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46. Liquidation preference example
Investment
Pre-Money
Founders share
Investor share
Exit value
Liquidation
preference
Payout founders
Payout investor
Multiple
Liquidation
preference
Payout founders
Payout investor
Multiple
Liquidation
preference
Payout founders
Payout investor
Multiple
CHF
300 K
CHF
1,200 K
80%
20%
CHF
600 K
1,200
2,400
3,600
4,800
0X
0X
0X
0X
0X
CHF
480 K
960
1,920
2,880
3,840
CHF
120 K
240
480
720
960
0.4 X
0.8 X
1.6 X
2.4 X
3.2 X
1X
1X
1X
1X
1X
CHF
240 K
720
1,680
2,640
3,600
CHF
360 K
480
720
960
1,200
1.2 X
1.6 X
2.4 X
3.2 X
4.0 X
2X
2X
2X
2X
2X
CHF
-K
480
1,440
2,400
3,360
CHF
600 K
720
960
1,200
1,440
2.0 X
2.4 X
3.2 X
4.0 X
4.8 X
Source : Peter Pfister, Angel Day 2013
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47. Getting started
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48. Investment process
50%
Screening
Evaluation
4-6 Months
Due diligence
Investment
1%
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49. Early early stage investors
Swiss-based VCs
International VCs
Swiss-based BANs
Aravis
Atlas Venture
Mountain Partners Group
Biomed Invest
BV group
Core Capital
Baytech Venture
Creathor Venture
Drapper Investment
Go Beyond Ltd
Business Angels Suisse (BAS)
Bio Valley BAC
EPS value plus
Invision
New Value
Redalpine Venture Partners
Vi Partners
Dpixel
Earlybird
Emertec
NBGI Ventures
Index Ventures
Start Angels Network
b-to-v
A3 Angels
Club Valaisan des BA
Blue Ocean Ventures
Aventic
BSI health Capital
Eurofin Capital / Polytech ventures
OCAS Ventures
Sofinnova
Swarraton Partners
Defi gestion
Fongit
Jade invest
Polytech Ventures
Tschudin+Heid
Vinci Capital
Target Partners
Wellington
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50. Steps in the BA investment process
Entrepreneur
Business Angel
Introduction
Pitching
Negotiations
of business
opportunity
Deal flow
identification
Business
plan
Due diligence
Valuation
discussions
Investment
readiness
Shareholder
agreement
Financing
Source: fiban.org
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51. Steps in the VC investment process
Stage
Entrepreneur
Evaluating B. Plan
Prepare Business
Plan
Due diligence
Negotiation
Provide information
Disclose all relevant
business information
Meet to discuss BP
Build relationship
Outline terms
Liaise with external
consultants and
accountants
Negotiate final terms
Document
constitution and
voting rights
Contact investors
Entrepreneur &
investor
Monitoring
Provide periodic
management
accounts
Communicate
with investors
Investor
Review the Business
Plan
Conduct enquiries
Value the business
Consider financing
structure
Initiate external DD
Draw up completion
documentation
Seat on board ?
Monitor
investment
Constructive
input
Involvement in
major decisions
Reports
Business Plan
Offer letter
Consultants reports
Accountant reports
Disclosure letter
Warranties and
indemnities
Memorandum and
articles of association
Shareholder
agreement
Management
accounts
Minutes of
boards and other
meetings
Source : Guide to private equity, BVCA / PWC, 2003
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EXIT

52. Negotiations
Why do deals fall through?
 entrepreneur struggling to let go of control
 limited role models (investor-backed
companies)
 inexperienced counsel
 “shoppers”, there’s a better deal out there
 two sides of the table can’t agree on “valuation
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53. Select an investor who understands
your business
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54. Your questions ?
Or case study
Thank you
80
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55. Case study
 Real Start-up Company
 Founded in 2009
 First financing in 2011 (BA)
 Successful market entry
 Closed financing round in spring 2013
 Financial planning as well as valuation
performed with Fintool 8.0
Source : Jean-Pierre Vuilleumier, Angel Day 2013
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56. Case study
Source : Jean-Pierre Vuilleumier, Angel Day 2013
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57. DCF calculation
CV
Growth rate and Return on
invested capital (ROIC)
estimated after the
planning period
(Copeland)
Continuous value (CV)
represents 80 % of
total Present value (PV).
Source : Jean-Pierre Vuilleumier, Angel Day 2013
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58. WACC cost of capital calculation
Source : Capital asset pricing method (CAPM); , Jean-Pierre Vuilleumier, Angel Day 2013
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59. Valuation sensitivity
Source : Jean-Pierre Vuilleumier, Angel Day 2013
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