Valuation Due Diligence Chelsea Eshraghi Director Carolina Angel

Valuation & Due Diligence Chelsea Eshraghi Director, Carolina Angel Network Chelsea@carolinaangelnetwork. com

Carolina Angel Network • UNC-affiliated accredited investors • Vet/screen potential investments • Early customers/early revenues – usually Series A or late Series Seed • Narrow down to 6 -8 per year • Conduct due diligence & facilitate closing • Portfolio monitoring o o $12 M invested 19 companies 27 rounds 186 members

Valuing a Startup Multiples • Ex: Digital health startup generating $7 M revenue • Comparable transactions usually trade at about 5 x revenue • Take the current revenue run rate (7 M) x multiple (5) • Pre money = $35 M Price Per Employee/User (Better for pre-revenue) ◦ Example: An AI co with 4 FTE ◦ Acquired AI companies typically trade at about $6. 8 M per FTE ◦ This would put this particular AI company at a 27. 2 M premoney valuation VC Method ◦ Founders should expect to give up about 20 -25% equity per founding round ◦ Ex: Founder seeking $1. 5 M should expect a reasonable valuation to be $6 M (1. 5 M / 25%) ◦ Post Money = Pre Money + Inv ◦ 6 M = 4. 5 M + 1. 5 M

Due Diligence It REALLY boils down to: • What is our investment thesis? • What needs to happen in order to achieve the return we want? • What could possibly go wrong?

Due Diligence Major Components: • Team • Technology & Competitive Advantage • Market & Competition • Deal Financials

My Contact Info Chelsea Eshraghi chelsea@carolinaangelnetwork. com