This document discusses the capital raising cycle of companies. It begins with an overview of the different stages a company goes through from investigation and feasibility to maturity, noting that capital needs change throughout these stages. It then focuses on the sources of capital for startups at different stages, from self-funding to IPOs. The document also examines what qualitative and quantitative factors determine startup valuations, such as the founding team, market size, growth potential, and comparables. It concludes with an explanation of how pre-money and post-money valuations are calculated when new capital is raised.

1. Capital raising
cycle of companies
Asif Khan, CFA
Deputy Head of Research
BRAC EPL Stock Brokerage

2. Investigation Feasibility Development Introduction Growth Maturity
PROFIT
TIME
Capital Lifecycle

3. Investigation Feasibility Development Introduction Growth Maturity
Proof of
concept
Pre-Seed Seed and
Start-up
Early
PROFIT
TIME
Capital Lifecycle
First Revenue
Expansion/Mezzanine

4. Investigation Feasibility Development Introduction Growth Maturity
PROFIT
TIME
Capital Lifecycle
Self
F&F, Govt.
Angel Investors and Seed VCs
VC & PE
IPO, Banks,
Bonds
First Revenue
Proof of
concept
Pre-Seed Seed and
Start-up
Early Expansion/Mezzanine

5. What determines
startup
valuation?

6. What determines valuation?
 Founding team
 Quality of other investors
 Competition
 Market size
 Expected near term revenues
 Growth
 Market situation and comparables
QUALITATIVE

7.  Founding team
 Quality of other investors
 Competition
 Market size
 Expected near term revenues
 Growth
 Market situation and comparables
What determines valuation?
QUANTITATIVE

8.  What is their background?
 Do they have prior experience?
 How passionate are they?
Founding team

9.  Did anyone else invest?
 What is the profile of the investor?
Quality of other investors

10.  Are you the first mover?
 How many other competitors exist?
 How aggressive are these competitors?
Competition

11.  How do you define your market?
 What is the size of the market in monetary terms?
Market Size

12.  What is your projected revenue (traction) in the
next couple of years?
 What is the conviction level that these targets will
be achieved?
Near term revenues

13.  How quickly can you ramp up?
 What are some of the constraints for growing?
Growth

14.  What is the state of the economy?
 What kind of valuation was attached to similar
companies?
Market situation and comparables

15. Dividing ownership up
Pre-Money valuation New Capital
Post-Money
Valuation
STEP 1

16. Dividing ownership up
Post-Money
Valuation
New Capital Stake of new investor
Pre-Money valuation New Capital
Post-Money
Valuation
STEP 1
STEP 2

17. The end