Valuation is a key concept for startups/tech companiess. Presentation describes different ways of thinking about valuation of startups in the digital/lean world.

1. STARTUP VALUATION (CONTROVERSY)
Tytus Cytowski,
Managing Partner
BITSPIRATION FESTIVAL
KRAKOW, POLAND
June 13, 2014

2. TYTUS CYTOWSKI
Attorney at Law
EDUCATION
• HARVARD LAW SCHOOL (LLM)
• WARSAW UNIVERSITY (Mag Iur)
EXPERIENCE
• STARTUPS
• VENTURE FINANCING
• LICENSING
ADVISOR
• STARTUP WISEGUYS (Estonia)
TRACTION TRIBE (Hungary)
• DEFY VENTURES (NYC)
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3. CYTOWSKI LLC
Disclaimers
 Any US federal tax advice contained in this presentation is not intended to be used,
and cannot be used, to avoid penalties under the Internal Revenue Code or to
promote, market or recommend any transaction or matter addressed herein.
 This material is for informational purposes only and do not constitute advertising, a
solicitation, or legal advice and should not be construed as legal advice for any
purpose whatsoever.
 Information contained herein is not intended to create, and receipt thereof does
not constitute formation of, an attorney-client relationship.
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4. CONTROVERSY?
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5. PRICES ARE CRAZY?
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6. INSTAGRAM $1B
SNAPSHOT $2 B
NEST $2 B
OCULOS $ 2 B
WHATSAPP $ 19 B
ESTIMOTE ?
INTELCLINIC ?
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7. STARTUP VALUATION DATA
YC $5-$8 M ($6.4 M Average)
Stanford Grad $1.5-$5 M ($3.3 M Average)
Google Employee $2-$5 M ($3.7 M Average)
Hardware $2.5-$6 M ($4.3 M Average)
Mobile Security $6-$ 9M ($5.8 M Average)
https://angel.co/valuations
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8. 7
STARTUP VALUATION DATA
POLAND $2.5-$4.1 M ($3 M Average)
BULGARIA $500 G – $2.8 M ($1.3 M
Average)
NYC $3-$5 M ($4.2 M Average)
SILICON VALLEY $3.1 -$6 M ($4.7 M
Average)
https://angel.co/valuations

9. DEPENDS
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10. LOW INTEREST RATES = SEARCH
FOR YIELD = HIGH RISK ASSETS =
ASSET PRICE UP = (FOREIGN)
TECH STARTUPS =
DISCONNECT/BUBBLE*
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US MONETARY POLICY
* Potential

11. DIGITAL REVOLUTION
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SOFTWARE IS EATING
UP THE WORLD
PEAK OR VALLEY?

12. DIGITAL REVOLUTION
DESTROYED
TRADITIONAL VALUATION
MODEL 11

13. VALUATION MODELS
- MARKET METHOD
- ASSET METHOD
- INCOME METHOD
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14. VALUATION
MISUNDERSTOOD
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15. 14
HIGHLY
SUBJECTIVE*
*VALUE OF PRIVATE VC MARKET
NOT PUBLIC

16. 15
VALUATION IS TEMPORARY

17. INVESTORS =
CURRENT VALUE
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18. FOUNDERS =
FUTURE VALUE 17

19. ABILITY TO MEASURE
MULTIPLES (P/E)
WALL STREET 18

20. ABILITY TO GROW VERTICALS
(REAL ESTATE)
– SILICON VALLEY
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21. 20
VERTICAL
KILLERS

22. CONVERSION -> RETENTION->
ENGAGEMENT*
*Lean methodology key concept for VC
valuation models 21

23. 22
CHANGES THE
FUNDAMENTALS

24. MEASURE 20/30+ YEAR
PERSPECTIVE*
*Different from Wall Street
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25. SCALEABLE
BUSINESS MODEL
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26. TECHNOLOGY
ADOPTION
A/K/A
VIRALITY
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27. VALUATION DO NOT
MATTER FOR EARLY STAGE
“Probability of getting
to the next stage”
-Paul Graham*
https://www.youtube.com/watch?v=2lcp0uZsY7
k
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28. VALUATION = COST OF
RUNNING EXPERIMENT plus 3
MONTH RUNWAY FOR
FUNDRAISING*
*http://venturehacks.com 27

29. FINANCING OF MISTAKES WITH
O.P.M. (OTHER PEOPLE’S MONEY)28
VENTURE CAPITAL

30. VC MISTAKES* &
PRICING**
*LOSING PORTOFOLIO HAS TO MAKE MONEY
** SOLUTION INCREASE VALUATION OF WINNING
STARTUPS 29

31. PRICE* & OWNERSHIP**
*More
Ownership
More Value
**Less Ownership
Less Value
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32. DILUTION IN NEXT ROUND*
*EXIT VALUE ONLY TRUE
TEST OF VALUE 31

33. FOUNDER + INVESTOR
COLLUSION (BIAS)
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34. THANK YOU!
WWW.CYTLAW.COM
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35. LIKE US ON FACEBOOK!
www.facebook/cytowskillc
FOLLOW ON TWITTER
@tcytowski
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