Cash Flow Valuation - How much is equity in my startup potentially worth?
Not only can the Kwik Look Cash Flow Evaluation tool empower you with the knowledge to shape your "hockey stick" .... it can also provide an indication of the potential value of equity in your business.
Case Study: NFT Platform
Five year cash flow forecast for early stage startup (in development, pre-release).
Based on the projected after tax cash flow, it is possible to estimate the potential investor "X" Factor (return on investment), using comparable Price to Cash Flow Ratios.
As all the cash flow input assumptions are contained in Kwik Look, there is a clear and simple basis for discussion of the business model, performance targets & deliverables, as well as any risk factor* (ie. probability of success) to be applied to the valuation.
This results in a valuation assessment based on a combination of qualitative and quantitative factors.
As mentioned previously, everyone knows and accepts that numbers will change - the important thing is to have a transparent and credible basis for engaging with potential investors.
* Risk Assessment Footnote
Consideration of Risk Factors will typically include - management risks, business stage, political risks, supply risks, marketing & sales risks, funding/capital raising risks, competition risks, technology risks, litigation risks, market risks, reputation risks, and exit risks.
Cash Flow & Risk - Pitch Deck & Investor Preparation
Typical Pitch Deck Preparation
When putting together pitch decks, founders typically show a graph of projected revenue to impress investors on the potential of their business idea. However, experienced investors know this is only half the picture, and will seek to understand the full business model if they are interested in your idea.
Once costs are included, the true trajectory of the business model is revealed
Recommended Pitch Deck Slides
Even if you don't include financials in your main pitch deck story, it is important to have the basic information in a back up slide. This will enable you to more credibly answer investor questions on your cash flow "hockey stick" and key metrics.
Addressing risks upfront is also another good way to boost your credibility, and can be readily summarized using a risk matrix.
Consideration of Risk Factors will typically include - management risks, business stage, political risks, supply risks, marketing & sales risks, funding/capital raising risks, competition risks, technology risks, litigation risks, market risks, reputation risks, and exit risks. Investors will raise their concerns during the Q&A anyway, so you might as well address & manage potential concerns in an open and transparent manner.