A peek of one of the method which VCs use to evaluate seed and early stage companies.

1. Start-up Valuation Clinic Venture Capital Series Roydean Osman, Vice President SEED Investment – CRADLE Fund Sdn. Bhd 17 th April 2008 MSC Incubation Center, Multimedia University, Cyberjaya

3. Where we are ? – Funding ECO System Growth & Profit Funding Needs Point Zero Other Grants, SME Loans & Incubators, Government Incentives, Angels & Corp Investors Project Financiers, Commercial Banks, Venture Capitals, Private Equity, Credit Guarantee Corporation, Leasing & Factoring Providers, Govt. Agencies Cradle Investment Programme Institutional & Foreign Investors, Public Funds, Merger & Acquisitions, Merchant Banks MDeC Maturity Expansion Production & Commercialisation Market Entry Production Enhancement New Markets Scaling & Expansion Commercial Success Pre IPO Listing & Go Global Design & Conceptualisation Idea Birth Product Prototype & Proof of Concept Seed Pre Seed Growth

7. Valuation Methodologies used by VCs (1) Understanding the Venture Capital investment process Biz Plans Kicks-In Products /Services Concepts/Ideas Analysis Entrepreneur Analysis Business/ Venture Analysis Conditional Termsheet Approval Deal Sources Due Diligence Deal Terms Investment Decision Go/No-Go Screening Evaluation Continues

8. Valuation Methodologies used by VCs (2) VC Cash Leadership (CEO) Implementation (CMO, CTO, CFO) Idea Idea has limited value Ability to implement project is most important What are you worth ?

9. Valuation Methodologies used by VCs (3) Cash Investment : $3 million Proposed Investor Share: 66.7% Post-Money Valuation : $ 4.5 million Pre-Money Valuation : $1.5 million Exit Valuation (Yr 5): $30 million (PAT) Return to Investor (IRR): 46% Cash-on-Cash Return Investor 6.7x First hand valuation by VCs – expected Return on Investment

10. Valuation Methodologies used by VCs (4) Negotiation with VCs $ Company Value VC Maximum Value Entrepreneur Minimum Value Negotiating Space

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