Valuation Methods
his model explains a simple way to value a start-up company when working with investors. It is provided courtesy of Joe Ollivier of First Capital Development, a private investment and hard money lending firm based in Provo, Utah.
Valuation Model: "Company Valuation Model / Ownership Percentage Offered This model explains a simple way to value a start-up company when working with investors. It is provided courtesy of Joe Ollivier of First Capital Development, a private investment and hard money lending firm based in Provo, Utah. Explanation Example of XYZ.com 1. Assumptions Investors will want somewhere between 50-100% annual return on their investment (ROI). The market will value the company on a P/E basis somewhere between 8-15 times earnings if it was a public company. While some internet companies have outrageous price to earnings ratios, you are better off to use a conservative price
to earnings ratio. XYZ.com Assumptions ROI per year Investors want on their investment: 100% The market will value XYZ.com somewhere around 15 time earnings. Third year after tax earnings: $1,650,000 Initial Investment Needed: $1,000,000 2. Valuation Multiply the p/e ratio by the third year after tax expected profit. This number gives yo"
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