{"id":2902,"date":"2023-02-22T21:42:42","date_gmt":"2023-02-22T21:42:42","guid":{"rendered":"https:\/\/course.oeru.org\/ient103\/?page_id=2902"},"modified":"2023-02-22T21:42:42","modified_gmt":"2023-02-22T21:42:42","slug":"basics-of-vc-valuation","status":"publish","type":"page","link":"https:\/\/course.oeru.org\/ient103\/learning-pathways\/valuing-a-new-start-up\/basics-of-vc-valuation\/","title":{"rendered":"Basics of VC valuation"},"content":{"rendered":"
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\"Brainstorm<\/a><\/div>\n

Four out of every five start-ups fail [1]<\/a><\/sup>. This is part of the learning experience for an entrepreneur, and many successful start-ups ‘pivot’ or change their strategy at least once before achieving a prosperous business model. <\/p>\n

It is important for entrepreneurs to understand how to determine the value of their growing business from the perspective of prospective investors. Once a start-up has implemented a minimum viable product and achieved the break-even point, it may be necessary to generate additional capital to grow the business.
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How do “sharks” determine the amount to invest in a start-up business?<\/span><\/h2>\n

Shark Tank<\/a> is an American reality TV series where entrepreneur(s) make business presentations to a panel of prospective investors (“sharks”). The “sharks” determine an investment amount in return for equity in the business.\n<\/p>\n

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10 most successful Shark Tank businesses<\/h2>\n\t\t<\/div>\n\t<\/div>\n\t
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The Shark Tank<\/i> TV series is an over simplification of the real world of investment funding. However, the following video provides a valuable stimulus to start thinking about how potential investors in start-up businesses determine the value of a new business and associated equity stake for their investment.\n<\/p>\n

When watching the video, think about the following questions:\n<\/p>\n

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  • How did the “shark” determine the value of the business proposal?\n<\/li>\n
  • How did the “shark” determine their equity percentage for the investment?\n<\/li>\n
  • Apart from the direct cash investment, what value does a third-party investor’s network and experience bring to a start-up business in return for equity?\n<\/li>\n<\/ul>\n

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