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Venture Deal Methods

This document contains financial information for comparable private health companies, including their price-earnings ratios, equity market values, firm values, and other valuation metrics. It also includes examples of company stock dilution from initial rounds of venture capital investment, as well as a case study on an entrepreneur seeking investment that outlines pre-money and post-money valuations and internal rate of return calculations over three rounds of funding.

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AaronLim
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43 views13 pages

Venture Deal Methods

This document contains financial information for comparable private health companies, including their price-earnings ratios, equity market values, firm values, and other valuation metrics. It also includes examples of company stock dilution from initial rounds of venture capital investment, as well as a case study on an entrepreneur seeking investment that outlines pre-money and post-money valuations and internal rate of return calculations over three rounds of funding.

Uploaded by

AaronLim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Comparable Private Health E

Price-Earning Ratio
Equity Market Value ($m)
Firm Value ($m)
Firm Value/EBITDA
Firm Value/Sales
Market Value(EV/BV)
FV/Members

Price per share / Earning per share


Price/share * #shares
Debt+Equity

Book value = equity


Firm value/total member(convert to millions)
// everythings is in mi

ealth Example
E.g Happy
14.07/0.67
14.07*30

everythings is in millions

Happy

Community health

$21.00
$422.10
$522.10

$14.50
$1,086.05
$1,086.05

$9.49
$1.24
$3.52
$870.17

$8.35
$1.28
$6.21
$987.32

Average

Valuation of Private hospital

$17.75
$754.08
$804.08

$532.50

$8.92
$1.26
$4.86
$928.74

$396.56
$436.14
$388.94
$459.37

85

//profit * price earnings

//remove debt
//remove debt

DILUTION
Stage 1
Shares
VC
Entrepreneuer
Company lots

Percentage
500
50%
500
50%
1000

Stage 1

VC

Entrepreneuer

Stage 2
Shares
VC 1
VC 2
Entrepreneue
Company lots

Percentage
500
42%
200
17%
500
42%
1200

Shares

VC 1

VC 2

Entrepreneuer

Case
Considering investment
VC target /annum
VC Target
Projected after 7 years
Average P/E ratio
Current shares issued

Time

Final VC percentage
At the end of year 7
Initial Percentage required

How much shares do we need to create


Venture capital needs to own
entrepreneuer owns
Total shares
New shares

Pre money valuation


Number of exisiting shares
before investment *
Share price in the finanical round
Exisiting shares
Share price in finanical round
Total shares

Post money
pre money + investments

Case

Dilution consideration
Round 1
Round 2

$5,000,000
50%
16.0859375
$20,000,000
15
500,000

$
17,558,299
300million/(1+Vc discountrate)^7
28.48%
He will need 28.47% of
ownership after being diluted
40.72%

How much shares do we need to create


40.72% of
59.28%
843,454.79
343,455

(500'000 shares + M
[new shares])
500,000

Pre money valuation

$
$

Post money
$

500,000
14.56 investment/new shares
7,278,978.39 New shares price * total shares

12,278,978.39

consideration
10%
30%

7
300,000,000
PE * profit = Valuation at year 7

$
85,429,687.50 $
return on his $5mil investment

5,000,000.00

Suzie Case
Considering investment
Pre money
# of shares
Share price
Post money
# of shares
Share price

$10,000,000
$3,000,000
1,000,000
$3
$13,000,000
1,000,000
$13

Deal 1 - one stage


Pre money valuation
Number of exisiting shares
before investment *
Share price in the finanical
round
Exisiting shares
Share price in finanical round
Total valuation

Post money
pre money + investments
VC
Suezie

1,000,000
$13
$ 13,000,000.00

$13,000,000
77%
23%

Year
Invesments

Suezie Pre money


VC fund
Post money

Pre money valuation


Suezie Pre money
VC fund
Vc fund 2

Post money
investment/new shares
New shares price * total shares

Pre money valuation


Suezie Pre money
VC fund
VC fund 3
Post money =
VC post money
Caculate the IRR
0
1
2
3

Total capital outlay


10

Deal 2
$

Round 1
2,000,000.00

$
$
$

3,000,000.00
2,000,000.00
5,000,000.00

$
$
$
$

Round 2
12,000,000
7,200,000
4,800,000
3,000,000

60%
40%

48%
52%

$ 12,000,000.00

$
$
$
$
$
$

Round 3
25,000,000
12,000,000
13,000,000
5,000,000
30,000,000
18,000,000

# of shares
Share price
1,000,000 $
7.20
666,666.67 $
7.20
416,666.67

2,083,333

40%
60%

aculate the IRR


-2
0
-3
13
60%

Valuation
18

# of shares
Share price
1,000,000 $
3.00
666,666.67
$3
1,666,667

Returns after
5 years
1.8

# of shares
Share price
2,083,333 $
12.00
1,000,000
1,083,333.33
416,666.67
2,500,000

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