Company Name

Valuation -- Venture Capital Method

Assumptions Ref

Month of IPO 48 A
Forecast annualized earnings at IPO $ 5,927,400.00 B
P/E ratio at IPO 10 C

Investment Round First Second Third

Month of Investment 12 0 0 C
Investor required IRR 25% 20% 15% D
Amount of Investment $ 2,000,000.00 $ 1,000,000.00 $ 1,000,000.00 E
Required Monthly IRR 2.08% 1.67% 1.25% F
Duration of Investment 36 48 48 G

Calculations

Market Capitalization at IPO 59274000 H

First Second Third

Firm Value at Time of Investment $ 30,348,288.00 $ 28,585,069.44 $ 33,890,101.88
Required FV for Investor at IPO $ 3,906,250.00 $ 2,073,600.00 $ 1,749,006.25 I
Individual Investor's Share 6.59% 3.50% 2.95% J
Individual Investor's ROI 1.953125 2.0736 1.74900625 K
Individual Investor's IRR 0.25 0.2 0.15 L

Investors' Share 13% M

Founders' Share 87% N

Negotiations

First Second Third

Individual Investor's Share 33% 0 0
FV for Investor at IPO 19,560,420.00 0 0
Individual Investor's ROI 978% 0 0
Individual Investor's IRR 114% -1 -1

Investors' Share 33%

Founders' Share 67%
Calculation

D/12
A-C

B*C

H/(1+F)^G
E*(1+F)^G
I/H
I/E
(I/E)^(12/G)-1

sum(J)
1-M
Company Name
Valuation -- Venture Capital Method
Years 1 to 5

Assumptions:
Investor required IRR 1 A
P/E ratio at IPO or acquisition 15 B
Initial investment 1000000 C

D E F
Venture Capital Method Year Net Income Capitalization
income stmt B*E
IPO in Year 1 1 $ 211,000.00 $ 3,165,000.00
IPO in Year 2 2 $ 400,000.00 $ 6,000,000.00
IPO in Year 3 3 $ 800,000.00 $ 12,000,000.00
IPO in Year 4 4 $ 1,200,000.00 $ 18,000,000.00
IPO in Year 5 5 $ 3,500,000.00 $ 52,500,000.00
G H I J K
Required Future Value (Investor) Share Return ROI IRR
FV(F,D) C/G F*H I/C IRR(I,C,D)
$ 2,000,000.00 63% $ 2,000,000.00 200% Err:523
$ 4,000,000.00 67% $ 4,000,000.00 400% Err:523
$ 8,000,000.00 67% $ 8,000,000.00 800% Err:523
$ 16,000,000.00 89% $ 16,000,000.00 1600% Err:523
$ 32,000,000.00 61% $ 32,000,000.00 3200% Err:523

Negotiation Worksheet
Year Share Return ROI IRR
1 25% $ 791,250.00 79% Err:523
2 25% $ 1,500,000.00 150% Err:523
3 25% $ 3,000,000.00 300% Err:523
4 25% $ 4,500,000.00 450% Err:523
5 25% $ 13,125,000.00 1313% Err:523