Saturday, November 5, 2011

Early Stage Valuation Pricing and Forecasting

How much do I get for $50,000 investment?

At Pre-Startup time the valuation for a directly experienced CEO and a thorough Business Plan is often set at $500,000; so, raising $50,000 then would sell 10%. If the Team is Complete then the Valuation is often $1 million.  Is a strong proprietary service or product is credible then Valuation tends to move to:

  • a discount on Valuation in Year 3 or Year 5.
The Valuation to Revenue Ratio is often the Key. Here is how you generate a Credible Forecast.

A credible Forecast and a Valuation Rationale should be presented and updated in reports to Investors.

Your Forecasts hang on 2 big issues: A Revenue Formula and Sales & Marketing Costs.  Forecast Monthly and update the Forecast at mid-month.

Examples for Revenue Formula and Cost: 
  • You expect the average sales person to generate $0.5 million initially growing over a 2 year period to $1.0 million each.
  • 45% to 55%, even 70% very early, as the Cost of Marketing for Advertising and Social Media Marketing is often appropriate for a high margin business.
Valuation, in early stage companies, uses the Valuation to Revenue Ratio. Identify Valuation to Revenue for publically traded comparable companies, like 4 times annual revenue. 

As a private company, use 50% of the Valuation to Revenue Ratio as a rough guide. A Rationale you might add is that your growth rate for the 1st 5 years is way above growth at Comparables.

A Valuation Example: In our 36th month, revenue for the month at $600,000 is a Run Rate of $7.2 million annually. Using 2 times revenue, that puts our valuation at $14.2 million. 

Rapid growth can be forecast well and controlled if you re-visit the forecast 2 times per month and if you insist on Measurement and Repeatability.

For more about a measurable and repeatable Revenue Generation Formula, please see my:





Early Financing: Angels and VCs the Fit

At #quora a Question asks if Early Stage Companies should choose Angels or VCs.

1. I prefer Angels for very early stages. They can bring local contacts as Employees or Customers and they do not interfere is strategy or in management. So, I choose Angels Until ...

2. VCs, Venture Capital is preferred when you want to raise $2 million+ and when you want Coaching and non-local Contacts.

Sunday, March 27, 2011

Story Stocks: Alternative Energy, Drillers, Miners

Hello. Do you trade Stocks? 


I do, a little. Most of my stock market time is day trading of stock options. Please see the Option Results posted 27 March 2011. From about $520k to about $1.4 million is the recent increase.


About Stocks. I trade those that are high volume and making New Highs including $AAPL, $NFLX, $GMCR, $NVDA, $ERX, $UCCO etc. I also Research Story Stocks, and trade them some times.


#Green companies, particularly in Alternative Energy is one focus.

A summary for each company is in a Row of the main table below.

Clean Energy Fuels $130 million in 2009. CLNE provides Natural Gas Fleet vehicle support, including an option for bio-methane. http://www.cleanenergyfuels.com/main.html.
from constructing, equipping and maintaining fueling stations to converting vehicles to securing the financing. 

Clean Energy, in 2009, opened the world’s largest public LNG truck fueling station to serve the Ports of Los Angeles and Long Beach and to act as one of the hubs of the new Southwest LNG Trucking Corridor for regional trucking.
GasFrac Energy of Canada TSE:GFS $97 mil in 2010 uses and licenses technology for Tar Sands to be handled cleanly using petroleum to force rather than water.

New Energy Tech NENED has late prototypes for Solar Windows. Spray it on and an existing window gens solar energy over 200% more efficiently than competing technologies.

SmartHeat is in China reducing Coal CO2 emissions.


As the developer of 6 key patents across our product lines, SmartHeat's plate heat exchanger (PHE) technology and products help reduce fossil fuel related costs and pollution by capturing and recycling waste heat thereby producing less CO2 emissions. More efficient energy use also leads to significant savings for end users as shown in the following illustration:

Heating Method
Coal Consumption(metricons)
Heat Produced(Kcal, million)
CO2 Emitted(tons)
Costs in Coal, USD
(excluding water and other costs)
WITH SMARTHEAT PRODUCTS:
District heating system connected to a co-generation power plant
550
1,680-1,870 KCal
1,944
$46,750
WITHOUT SMARTHEAT PRODUCTS:
Small Boiler with traditional shell-and-tube
heat exchanger
1,496
1,680-1,870
KCal
5,293
$127,160


 Story Stocks
What follows is extracted from a google.com/finance portfolio.




Agenus IncAGEN0.910102.53M258,610.001.720.7(0.24)1.69
Albany International...AIN24.62768.14M145,246.0026.09151.2020.441.79
Approach Resources Inc.AREX31.73902.22M249,615.0034.726.120.3590.801.04
Atwood Oceanics, Inc.ATW45.492.94B841,482.0046.5423.713.7312.201.38
Bellatrix Exploration...BXE5.43*529.14M707,688.006.192.53(CA$0.29)1.56
Brigham Exploration...BEXP35.284.13B2.58M37.113.450.3892.242.91
China Agritech Inc.CAGC6.88142.87M599,508.0028.386.690.2132.561.79
China Shen Zhou Mining...SHZ4.36*134.34M2.79M10.840.60.2219.402.55
Clean Energy Fuels Corp.CLNE14.05987.06M1.44M23.711.75(0.11)1.98
Cleveland BioLabs, Inc.CBLI7.32213.18M222,415.009.62.8(0.99)1.61
Coffee Holding Co., Inc.JVA5.6531.02M33,488.008.143.670.5210.852.34
Cree, Inc.CREE44.854.91B3.62M83.3842.761.8823.840.89
Dolby Laboratories, Inc.DLB48.105.39B1.04M70.1446.82.6218.360.88
F5 Networks, Inc.FFIV95.677.73B4.78M145.7660.52.1943.771.25
Gabriel Resources Ltd.GBU7.27*2.53B624,155.008.63.77(CA$0.07)0.54
GASFRAC Energy Services...GFS12.43*757.72M548,654.0014.620.1CA$0.11115.36
Gastar Exploration Ltd...GST4.66*299.07M397,184.005.772.85(0.25)1.33
General Moly, Inc.GMO5.26*386.66M821,574.007.252.85(0.22)2.90
Green Tech. Solutions...GTSO2.75*367,785.00113,850.004000.2(1.57)-3.34
GREENLAND MINERALSGDLNF1.06*300.67M394,868.001.440.185
Hong Kong Highpower...HPJ3.3745.77M71,442.006.56992.810.388.82
Huntsman CorporationHUN17.754.22B3.14M19.18.17(0.07)2.08
Itron, Inc.ITRI53.022.15B693,467.0081.9550.762.5620.721.46
K-V Pharmaceutical...KV.A8.97536.50M3.21M13.550.605(5.49)3.01
Metabolix, Inc.MBLX9.58257.79M207,917.0018.4397.77(1.45)1.66
Midway Energy Ltd.MEL4.79*329.06M425,285.005.322.81(CA$0.06)1.97
Minefinders Corp. Ltd...MFN12.75*1.02B605,999.0013.098.24(0.17)0.98
Netflix, Inc.NFLX230.0112.17B5.94M247.5573.342.9677.620.48
New Energy Tech., Inc.NENED2.55*52.53M115,723.009.871.275(0.08)2.40
NVE CorporationNVEC56.02267.00M45,387.0063.49382.7320.501.02
QC Holdings, Inc.QCCO4.2773.22M16,105.005.583.380.785.440.34
Quality Systems, Inc.QSII81.992.38B186,857.008352.91.9342.460.90
Rare Element Resources...REE12.37*558.19M3.40M17.922.79(0.06)
Silvercorp Metals Inc...SVM14.072.46B2.67M15.355.860.3935.63
SINA Corporation (USA)SINA103.526.31B2.68M104.4432(0.39)1.34
SmartHeat IncHEAT3.43132.23M273,376.0012.693.350.685.047.13
Sodastream Intl. Ltd.SODA42.01772.31M431,599.0046.8823.150.9842.85
Synalloy CorporationSYNL12.7580.19M10,827.0015.57.90.6419.921.66
TransGlobe Energy Corp...TGA13.891.01B621,613.0020.265.330.5525.251.00
Western Wind Energy...WND1.46*76.80M142,518.001.731(CA$0.08)1.24





-- from Bruce W. Lynch   BruceLynch.com
Boston area Technology Entrepreneur

    http://Twitter.com/brucelynch --  Comments about Stocks, Start-ups, the Economy, and Green issues.