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Startups Business Valuations | Hany Sewilam

Business Valuations For Early Stage Companies by Hany Sewilam
Produced by ENTR "Silicon Valley" - 2020

Everything you must know about the business valuation process and how to discover the fair price for your early stage project

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Startups Business Valuations | Hany Sewilam

  1. 1. BUSINESSVALUATIONS FOR EARLY STAGE COMPANIES Hany Sewilam | Managing Partner June 2020
  2. 2. 2 WHAT I PROVIDE!  Business valuation services include:  Investment Valuations  Tax Related Valuations  Litigation Valuations 2 Contact me at +1-832-640-7602 Or via email
  3. 3. 3 WHAT I PROVIDE!  Consulting Services include:  Pro Forma Projections with Defensible Assumptions  Due Diligence and Quality of Earnings  Preparation of a Company for Sale (People, Processes and Systems)  Operations and Process Improvement  Interim CFO Services 3 Contact me at +1-832-640-7602 Or via email
  4. 4.  Sale of your business - Asset Valuation  Seeking Financing (from Bank or Investors) - Equity Valuation 4 WHY DO I NEEDA BUSINESSVALUATION?
  5. 5.  Company issues stock options, restricted stock or completes a round of Preferred Financing (Series A or B) - Business Valuation is required to comply with funding Req.  Company has intellectual property (patents, trademarks, copyrights, proprietary software, etc.) - IP Valuation 5 WHY DO I NEEDA BUSINESSVALUATION?
  6. 6.  Valuation – an opinion of value of the tangible and intangible assets of a business.  It is performed as of a specific time period by an experienced and accredited valuator.  What are the components of a business valuation? A BUSINESSVALUATION IS: Business valuation is a process and a set of procedures used to estimate the economic value of an owner's interest in a business. Valuation is used by financial market participants to determine the price they are willing to pay or receive to effect a sale of a business.
  7. 7. BUSINESSVALUATION COMPONENTS REMEMBER  Identify the Purpose and Use of the Valuation  Define the Appropriate Standard of Value  Describe the Definition of Valuation Problem  Classify the Approaches to Value REMEMBER 7  State the Effective Date  Identify the Intended Users  Confirm the Conclusions of Value
  8. 8. PURPOSE AND USE OF THE VALUATION REMEMBER Define the purpose and use for the valuation.  Is it for Investment purposes?  Are you seeking Financing?  Are you issuing Employee Stock Incentives?  Is it for a Buyout of a Shareholder interest? What is the use of the valuation?  Identifies whether a high or low value is being sought. REMEMBER 8
  9. 9. STANDARDS OFVALUE Fair Market Value – The most probable price that a business would bring in a competitive and open market under all conditions requisite to a fair sale where the buyer and seller act prudently and knowledgeably and assumes the price is not affected by undue stimulus. may include discounts for lack of control and/or marketability. Fair Value – is essentially the pro rata fair market value of the entire company without discounts for lack of control and/or lack of marketability applied. Investment Value – the value to a particular investor based upon their stipulated investment requirements. 9
  10. 10. DEFINITION OFVALUATION ISSUE  Identify what is being valued.  Assets, Equity, IP, etc.  Identify the approaches to value that will be used to value the Company.  Market Comparisons, Income Approach, Discounted Cash Flow Analysis, Replacement Cost Approach  Identify Company issues that may affect the value. (i.e., litigation, contingent liabilities, subsequent sales, etc.)  Identify whether discounts/premiums will be analyzed for the subject being valued. 10
  11. 11. APPROACHESTOVALUE AN ESTABLISHED COMPANY Market Approach  Private Company Databases  Public Company Databases Income Approach  Strengths and Weaknesses of Company  Discounted Cash Flow Analysis  Ibbotson’s Build-Up Approach  Excess Earnings Analysis
  12. 12. APPROACHESTOVALUE AN EARLY STAGE COMPANY  Discounted Cash Flow Analysis  Replacement Cost Approach  Reasons: No other way to measure the Company.  Measure it by its capital investment or  Measure it by what it is expected to produce
  13. 13. VALUE OF A BUSINESSVALUATION FOR ENTREPRENEURS  Independent Analysis Of The Value Of Your Business  provides credibility and support for negotiations with potential buyers  provides compelling reasons to support stated purchase price for the business  Barometer Of How Well The Business Is Doing  shows the strengths and weaknesses of the business so you can focus the company on improving weak areas 13
  14. 14. CONSIDERATIONS FOR EARLY STAGE COMPANIES  Develop relationships with Business Advisors (Attorney, CPA)  Work with advisors to determine the right Equity Structure for your business  Develop 3 Year Pro Forma Projections (keep them updated)  Providing defense for the underlying assumptions is very important  Budget for a Business Valuation (along with legal, accounting, etc.)  Valuation firm should have the credentials and experience with the type of valuation being performed
  15. 15. CHECK QUALIFICATIONS OFVALUATION FIRMS  Does the firm have the credentials to perform the type of business valuation being performed?  Does the firm have acceptable accreditations?  How many business valuations has the firm performed?  What other services does the firm provide besides basic valuation services? Are there any conflicts of interest?  Obtain customer references from the firm and check them out.
  16. 16. MORE ABOUT HANY SEWILAM… Hany Sewilam is the CEO of ITEX. He has extensive strategy, operations and marketing experience across the technology, media, SMEs, products and services sectors. He was most recently the Managing Partner and Business Development Head of AJA Venture, working closely with leading global and regional companies, as well as, the startup and VC ecosystem. He has advised Fortune 500 companies as a senior consultant with AJA Venture and led teams at Creative Sense, Pulse Group, Jobardo, SuperLady and Orkanza while working in the U.S., Middle East, and Africa. Hany holds an MBA and two bachelor's degrees in business administration and finance. He is a board member of ENTR in Silicone Valley and The SuperLady Enterprise Forum. Hany is a regular speaker at major regional events on Sales, Marketing, eCommerce, Technology, Business, Entrepreneurship and startup's issues.
  17. 17. THANKYOU +1-832-640-7602 HanySewilam@gmail.Com