Startup valuation / projections

CFA General
#1

Hello guys,

I would much appreciate a bit of help with the below - especially from our VC people around.

I’m building an IM for a series-A funding round and I am trying to work my mind around the projections. I understand that valuation should be pre-money and I have built a DCF to reach to a price. My projected cash flows do not incorporate external funding and I’m using a range of discount rates b/ween 35% and 45%. My question relates to the projections I will be presenting in my deck. The reader of the IM will be an investor ie a VC, hence my guess is that they will be interested to see post-money projections / ROI etc. Would it be reasonable then to present both i. post money projections (including uses of funds) so the investor can get a feeling of expected returns and performance and ii. pre-money projections so that I can defend the derived valuation?

Thanks for your time:)

#2

35-45 is a little too high IMO for discount rates should be more like high 20s to low 30s. Stick with Post Money. If you have time to do both then sure why not?

#3

Hello - thanks for the response.

I had a lot of time to think about it and it is clear now that the projections and the valuation should be post money. The reader of the deck will be an investor and what matters to him is the effect of the capital injection on that company - how would he otherwise get a feeling of potential returns?

When it comes to discount rates, it depends on the stage of the company. For an early stage startup 20-30% is way too low. At the end of the day you are not expecting intermediate +ve net cash flows as you are heavily reinvesting. Most of the times there’s an exit multiple on the final Revenue figure and then a discount rate based on VCs hurdle rates which are def not that low.