Valuing Start-Ups & Pre-IPO Companies

• Understand the life cycle of company valuation and what key metrics to consider.
• Have explained to them the different financial pre-IPO funding rounds from seed, Series A, B and C to pre-IPO rounds to the IPO (Initial Public Offering) analysis
• Master the company valuation methods and methodologies of pre-IPO companies, including seed, scale-up and growth phases
• Learn how to perform capitalisation tables and ownership dilution with the option pool.

Introduction to Valuing Start-ups

• Lifecycle of companies, from valuing start-ups to pre-IPO companies at the pre-IPO marketplace
  • The Initial concept, product development, manufacturing and sales
  • Assessment of level of revenues, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) profitability and cash flow positiveness
• Financing Rounds at the pre-IPO marketplace
  • Seed, Series A, Series B, Series C and Pre-IPO funding Rounds
• Structure of VC investment: two-tier equity structures, convertible preferred stocks
• The players in venture capital (VC) Investment
• Exercise: Participants perform mini valuation case studies on risk and return and investment structuring

Valuing Start-up Companies methodologies

• Seed phase vs growth/scale-up phases
• Pre-valuation and post-money valuation
• Seed company valuation method
  • Berkus
  • Scorecard
  • Risk factor summation
• Exercise 1: Compute the value of a potential investment in companies pre-IPO at the seed capital level
• Exercise 2: Value a start-up company at the growth & scale-up level

Funding Instruments & Capitalisation Tables

• Cap. tables as a summary of ownership structure at different funding rounds
• Up, down and flat rounds
• Using debt instruments with equity characteristics: convertible preferred stocks
  • Conversion into common stock
  • Liquidation preference
  • Anti-dilution protection
  • Protection in future 'down round'
  • Control (board seats and votes)
  • Veto rights and blocking rights
  • Pre-emptive rights
• Dilutive instruments: option pool & ratchets for management and employees
• Case study: participants build a complete capitalisation table based on convertible preferred stocks

Final Case Study

• Participants will assess the VC investment in Project Future
  • A growth company specialised in developing robots to assist the mobility of older people
• An Entire financial model will be built, a 10-year three-statement financial model
  • Series A, B, C, D and E through the lifecycle of the company
    • Venture Capital Method used with capitalisation tables
    • For Series C, a DCF (Discounted Cash Flow) will be performed
  • IPO analysis as the main exit for the VC investment
    • Establish the IPO analysis offer price with trading multiples and DCF
    • Decision on level of primary vs secondary shares
    • Pro forma balance sheet, analysis of multiples per offer price
  • IRR (Internal Rate of Return) and MoIC (Multiple on Invested Capital) returns calculated in VC investment

The trainer has more than 20 years of experience in accounting and investment banking. He is an experienced financial trainer who has delivered courses for leading financial institutions and central banks in the City of London, Wall Street and around the world in the areas of Corporate Finance, Valuation (Industrials and Banks), Financial Modelling, M&A (Mergers & Acquisitions), Leveraged Buyout (LBO), Financial Accounting, Capital Markets, Bank Regulatory Capital and Financial Risks, both in English and French.

He began his career as a Credit Analyst (VC investment analyst) at Banque Continentale in Luxembourg, where he conducted credit analyses for short and long-term credits and participation in loan syndications. He then worked as a Senior Auditor for Deloitte & Touche in Luxembourg, auditing and preparing financial statements for a variety of banks, insurance, investment funds, venture capital investment and commercial pre-IPO tech companies.

He continued his career in Investment Banking at Citigroup (ex-Salomon Smith Barney) in London and New York, where he worked on a variety of M&A, LBO and debt offerings, mainly for financial services clients. He was involved in the EUR 20 billion public offer of Crédit Lyonnais by Crédit Agricole, one of the largest European banking transactions.

He then worked as a Vice-President in the internal M&A department of Barclays Bank in London, where his experience included the acquisition of ABSA for US$ 5 billion, one of the leading South African banks, the purchase of ING Private Banking in France and the failed acquisition of Banco Atlantico in Spain.

Recently, he was a Director in the Investment Banking department of Commercial International Bank (CIB), the largest non-government bank in Egypt, where he has successfully completed several transactions, including two sell-side M&A deals, one follow-on equity offering and a delisting. He worked extensively with leading sovereign wealth funds, private equity firms and prominent families in the United Arab Emirates (UAE), Qatar, Kuwait and Saudi Arabia.

The trainer is currently a senior advisor to an M&A practice based in Paris and focuses on buy-side and sell-side transactions, mainly in the technology sector.

The trainer has an MBA (Masters of Business Administration) in Finance from the Kellogg School of Management in Chicago and a Bachelor of Science in Finance from Groupe INSEEC (“International Management Institute of Paris”). He also holds « Series 7 » and « Series 63 » US licenses.

This advanced valuation and modelling course looks at approaches to be taken when completing a valuation of companies, to enable participants to value companies which may be at differing stages of development and growth profiles. Traditional valuation techniques assume a simple two or three-stage growth profile and a terminal value or basic multiple-based valuation tools. This course looks at some of the more difficult pre-IPO companies to value based on the underlying fundamentals of the development stage at which the company operates.

The course covers companies at the early growth and start up stage, such as technology, biotechnology and any early funding stage business. The key challenges associated with such companies are discussed and the best valuation approach considered.

The course also covers pre-IPO companies in the rapidly growing phase of development which, depending on the geographic location, may cover a wide variety of sectors. As well as discussing some of the current issues with traditional cash flow and multiple-based pre-IPO valuation approaches the course will cover more advanced valuation approaches such as decision trees, simulations, scenario analysis and real option valuation. The course will also consider the role of risk assessment in the valuation process and how macro-economic analysis can affect the pre-IPO valuation approach taken.

Examples are provided to illustrate each issue.