How to Calculate Venture Capital Based on 4 Methods

How to Calculate Venture Capital Based on 4 Methods

How to calculate venture capital? This question may often arise among investors or startup business owners. There are several methods used to calculate venture capital. The most important thing is that it depends on where the business operates.

How to Calculate Venture Capital?

Talking about venture capital methods, there are four commonly used methods. Some of these methods are called the venture capital valuation method, the Scorecard valuation methodology, the Dave Berkus valuation method, and the risk-factor summation method. Here is a brief explanation of the four methods:

Venture Capital Valuation Method

The first method is how to calculate venture capital by using the method of Bill Sahlman. He introduced this method in 1987. It focuses on determining the pre-money value, by determining the post-money value.

The investor aims to find a return with a value of several multiples of the initial investment. The future value of the company will be determined by the methods described earlier, including discounted cash flows that have been discounted by market multiples.

The use of the market multiples method is a common way of achieving terminal value. Additionally, there are some terms that you need to know first. Starting from ROI (Return on Investment) and terminal value.

ROI is the ratio of money lost or gained in an investment, the amount following the money that has been invested. While the terminal value is the selling price of a company that is given capital in the long term, it can be around 5 or 8 years. The equation is as follows:

ROI Terminal Value : Post-money Valuation
Post-money Valuation     Terminal Value : Anticipated ROI
Pre-money Valuation Post-money Valuation – Investment amount

Scorecard Valuation Methodology

The second method uses a comparison between the targeted companies and startups that receive funding from an angel investor.

The scorecard valuation methodology is done by adjusting the average value of a company that has just received funds for pre-money determination. Certainly, the comparison applies to companies at the same development stage.

Then compare the target company by considering several things, such as the strength of the management team, product or service opportunities, product suitability, and sales channels.

Dave Berkus Valuation Method

Dave Berkus is a lecturer who has invested in several start-up companies. This method was updated in 2009 with a zero-money pre-assessment, then provides a quality assessment of the targeted company based on several characteristics.

Some of the characteristics include the quality of the management team, sound ideas, board of directors, working prototype, and product launch or sales.

The Risk-Factor Summation Method

The next approach is referred to as the Risk-Factor Summation Method. This is done by considering some factors for the determination of pre-money from the company.

As the description from The Ohio Tech Angels reveals that investors should think about the existence of some risks. This is seen from the number of risk factors that will affect the overall high risk.

Recommended Venture Capital Southeast Asia You Should Know

Indogen Capital is one of the best Indonesian Venture Capital that you should know. Indogen Capital is one of the best Venture Capital Indonesia that you should know. This firm is suitable for those of you who are just starting a business and hope to get capital from experienced investors.

Not only participating in the provision of capital, but the Jakarta venture capital / Indogen Capital Company also provides advice for the better development of your company. However, Indogen Capital is well known not only in Indonesia but also in Asia as a whole.

This will be a great opportunity to collaborate with the professional team. That’s how you must start it now.

If you are still confused about how to calculate venture capital or have some questions about it. You can directly check the Indogen Capital website or start consulting with our team.

By: Belajar Bisnisan