Valuing a start-up, calling fundraisers or even estimating a provisional budget thanks to a financial forecast table, there are several methods for a company that has just launched its market. fix the quantity of a round table. Financing that will accelerate the development and growth of VSEs or SMEs. overview of how to set the value of your fundraiser as a start-up.
Estimate the value of your startup
To know how much money you can raise, it is important to know the market value of your startup. You can estimate your company’s valuation yourself. Young companies are evaluated on a number of criteria, including:
- The startup concept
- The team and its skills
- potential innovations
- Advancement in R&D of the proposed solutions
- The characteristics of the target market
- The advantages over the competition
In addition to these criteria, there are specific methods for valuing your start-up, including discounted cash flows valuation. This is a method of evaluating the business by estimate your future financial results.
If the start-up has already raised funds, it is possible to use the evaluation with the comparative approach: it consists of comparing similar start-ups that have completed funding rounds to know their evaluation.
Use your business plan
The business plan is the essential tool forentrepreneur : allows the latter to present its financial forecast table and, therefore, its provisional budget. Identifies the entire cash flow of a start-up, in particular all charges and expenses, to present them to potential investors or Business Angels. Projections are usually made for a minimum period of 3 years, and can go up to 5 years.
In addition to presenting these cash needs, the business model is the tool that allows the entrepreneur to present his project in the smallest detail: strategy, market analysis, presentation of the offer. what can attract investors and make them want to invest in the project and, therefore, grant its funding. It is important to work well because it is the medium you will use to present your business model to banks, investors and Business Angels.
The objective of the financial part of the Business Plan is to convince the reader of the Business Plan to invest. This part should clearly identify the financial needs generated by the project, the creation of added value, as well as the sustainability of the project. Thanks to this financial part, it will be easier for entrepreneurs to calculate their needs in terms of fundraising.
Hire fundraising professionals
It can be tricky to define the value of your fundraising yourself. It is possible to be accompanied by a professional in the sector. Fundraising accompanies entrepreneurs in the presentation of their project to help them convince investors. However, the collector takes a fixed amount negotiated from the beginning that he will receive, whether the fundraising is carried out or not.
A lawyer can be beneficial for your contract with a fundraiser: the fundraiser should be well established and negotiated so that there are no problems. It is a question of negotiating your duration of intervention and your remuneration, resorting to a lawyer can help you with these formalities. It controls and oversees all elements of the contract and ensures that you are informed of clauses you may not be aware of.
Calculation methods for fundraising
There are two types of calculation methods for predict the quantity of a round table.
The intrinsic method aims to analyze what is inside the company. There are several types of calculations:
- Company balance sheet valuation, not suitable for traditional and technological companies
- The assessment of the company’s assets, adapted to investment companies or holdings
- Business profitability assessment
- Discounted cash flows: valuation by discounted cash flows.
The analog method aims to create more complex calculations. There are four types of analog calculations:
- Apply the performance multiples of a company in the same market to operating income or net income
- Apply a multiple of operating income, typically used for companies that are already listed on the stock exchange.
- Apply a multiple of net income: market capitalization / net income ratio
- Substitute market capitalization for selling price to apply comparable transaction multiples.
Sell a part of the capital to investors
Not to be forgotten, who says fundraising, says transfer of a part of the capital to investors. However, you must be careful not to give up stocks too easily. For a first fundraising, it is essential to remain as the majority player in your company: do not sell more than 30% of the capital to the investor. This is important because if you want to raise funds again, you will have to leave an interesting part of the capital for future investors and Business Angels.
Once an investor has acquired a part of its capital, it becomes, after a certain percentage, a potential decision maker of your start-up. It may exert some influence on the company’s main decisions if the company does not achieve satisfactory results after raising funds. Seeking to monetize their investment, the grantor wants the company to succeed in its market. On average, for a seed round, companies sell 15% of their capital to investors.
Note that when an entrepreneur has raised a lot of money for his start-up, the goals to be achieved can become more difficult. The larger the investment, the more demanding investors will be about the start-up’s financial performance. The more shares they have in their capital, the more the investor will want control decisions made by the VSE or the SME.