The high valuations of VC-era startups

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Wen/Wang Yiyu

Entrepreneurial Circle of various financing news frequently come, let people itch. A 13-person iOS online only a few days of vertical social networking site A round of valuations announced 100 million U.S. dollars; pull the net 1 years two financing valuation near 800 million yuan; Clove Garden received 70 million U.S. dollars financing; haha carpool again won the million-dollar B-round financing .... Some entrepreneurs jokingly, usually a little bit more reliable projects or entrepreneurs, behind a lot of VC in line waiting for money.

According to 36 Krypton Statistics, August 25 31st in the week, there have been 37 domestic and foreign investment and financing incidents, including 28 in China, foreign 9, but also including mergers and acquisitions incident 10.

Analysts from the red dot risk have compiled data showing that 69 smart hardware companies or platforms have been financed from only last May to August this year, excluding undisclosed companies. In addition, online education and internet finance are the two years of investment is a big hit.

There is a plethora of financing for the angel or seed phase. The "F90 incubator" of the School of Entrepreneurial wizardry, which targets internet entrepreneurs, has invested 10 projects in the last one months alone. Because it is the seed period, the amount of each project is only 20.5 million yuan, accounting for less than 10% of the entrepreneur's equity. Wei, founder and CEO of the School of Entrepreneurial wizardry, thinks the future will be even hotter, "we're going to invest 200-300 projects a year next year."

Entrepreneurial circle into the "National Angel" and "Everywhere VC" era, the high valuation of start-up companies from?

VC crazy to spread money behind: first-line fund large financing

What caused the current investment boom in TMT industry?

Too much hot money is the core.

Hua Chuang Capital partner Shiong said to NetEase technology, the first-line fund this year have melted a new capital, the general year will be 40% of the money cast out.

The entire US economic recovery and the opening of the market window have also stimulated the investment boom. Red Dot Investment senior analyst Xie Morningstar analysis, the big environment to become better three factors directly affect the capital market investment boom. First, the US economic market has fully recovered, investors are bullish on the US economy, with U.S. shares doubling from last year to this year, at the top of the year, at the end of March. Second, the market window period opened, last year, 10 stocks in the U.S. listed in the first half of this year and 8 more successful listing, September will usher in the largest market capitalisation of the technology company Alibaba listed; third, the market's first-line funds have been merged into a new fund, including IDG, Jingwei, Qiming, Shun, GGV, Blue chi, these funds need to be in the years to invest in these funds out, and even a year to invest billions of dollars in demand.

In short, the tide is rising!

In addition to a better capital environment, many investors believe that the domestic entrepreneurial projects in terms of quantity and quality indeed have a significant increase.

"This is indeed the golden age of entrepreneurs. "Just got a b round million dollar financing of haha carpool CEO Li Hua to NetEase Technology, said he experienced 2008 years of financial crisis, when Sequoia Capital said a very famous words: This time your investment decision-making than your family is also important. "I was able to invest in Han and no one voted for 40 million dollars at the time," he said. ”

But the economy has cycles, and peaks are bound to trough. Hua Chuang Capital Partner Shiong judge, in next year venture capital certainly will have the contraction, cannot appear like this year such hot status quo. When the tide receded, the naked swimmer will also be present.

One side is a succession of start-up projects financing news, while investors sigh how "Crazy Rob Project" and the project is too expensive. In the hot money era, how to estimate the valuation of entrepreneurial projects?

Many investors and entrepreneurs to NetEase technology, the company's valuation as the paper media circulation, the app download, the outside world never know what the specific number is. In general, the public valuations of entrepreneurial projects are customarily "divided by 2", and individual Firms "divide by 4 or 5", and even some companies publish valuations directly as financing amounts.

Although haha carpool CEO Li Hua said that the market has now invested in projects, are "one would like to play a willing to suffer." But the chairman of the net, Xu also admitted that some companies are really not worth so much money. So how exactly should a company's valuation be calculated? Let's take a specific business as an example, to see how a business from the start-up to the B-round financing, are specific how to value.

I want to be your angel: because I believe

In the entrepreneurial Angel period, no number can be seen, or even no products to see, to obtain investment completely spell the founder's "character."

Dongfanghong's partner, Zhang Yilong, who decided to pay when he was just looking for an angel to pull the net, was based on his commitment to the group's ability to make 3W cafes and the three-person small team in difficult times.

"Without spending money to create a certain reputation in the Internet circle, these three people are really a bit of a talent." "Zhang Yilong said, touched him is two details, one is 3W coffee has a wall is full of various internet company dolls, the second is 3W Coffee three founder Xu, Madelung, Bauai full-time business in the most difficult still can not leave. At the time, the Entrepreneurial Café 3W, although the reputation of the crane, but does not make money, three founders want to do an Internet product, but specifically do not have to think well. But based on the previous cooperation in 3W, Zhang Yilong is also known Xu only for many years of friends, Dongfanghong promised to pull a part of the net Angel investment.

But Dongfanghong money is not enough, Xu just find angel investor Yang Xiangyang, persuade him also participate in Angel investment. As Dongfanghong has agreed to take a stake, the equivalent of an endorsement, Yang Xiangyang is relatively easy to enter the capital.

Then Yang Xiangyang pulled into the Zeng Liqing, Xiaoping and other 6-person heavyweight shareholders. Finally, 3W and pull hook nets respectively obtained Dongfanghong Road and 6 Angel shareholder's millions of Yuan Angel investment.

"Angel investment is not about our business model, because at that time we didn't know what to make money for." They don't necessarily understand all the things we do, just because they believe, so they support us. Xu said that he was still in a confused period, but simply think that the thing to do there is a certain space for exploration. In just one year, pull the network has obtained a round 5 million dollar financing and B round 25 million dollars of investment.

In China's Internet circle, the investment of acquaintances is one of the most common angel investments, including Lei and others who have said "only acquaintances, friends or friends who only invest in Friends". Because in the angel period of entrepreneurship and even seed period, many entrepreneurs just have an idea, no team and no products. Investors can consider only the founder's ability, character and background. The founder's reputation has played a very important role.

At this stage, continuous entrepreneurs are more likely to get investment. "If they fail one or two times, he knows more about where to start, and it's easier to succeed." "There are investors to NetEase technology analysis, but if too many failures, such entrepreneurs investors are also taboo."

The angel phase of financing, due to the few measurable indicators, basically no valuation. The amount of financing and the proportion of equity is generally in accordance with the rules. Angel Stage is generally 1 million--3 million RMB, accounting for 15%-20%. But for 1 million or 3 million, it's all about negotiations between entrepreneurs and investors.

A-round valuation: Relying on Guild rules + partial data

After getting the angel investor's money, the start-up company can generally make a product and obtain a small number of users, the whole business model has a preliminary verification. is the product good or not? Can the model be sustainable? At this time, entrepreneurs in the heart of these two questions have a ballpark answer.

To pull the network example, the founding team made a website, operating a period of time after the understanding of some data, such as how many users will register, how many users will vote resumes, the number of people who have found jobs.

When the business model has been preliminarily validated, entrepreneurs can consider looking for a round of financing. Because this time, if investors give you more money, this money can help you in product improvement, user size, industry ranking on a big step.

The A-round financing of the network was 5 million dollars invested by Bertelsmann, which was officially announced last March, but was actually completed in December.

"When I was a start-up project," assured the United States, and Bertelsmann had contact, but did not cooperate successfully. We are already familiar with each other this time, so it will be very quick to talk directly. "Xu said that the financing process is much smoother, but one weeks before and after the talks." "Bertelsmann's partner, Ding Haipeng, had a good talk with us and pulled us to the office to meet one of their other partners, Yu, and Yu also felt quite reliable," a-round talks. ”

How is the amount of a round of financing determined? Xie Morningstar said that the first-round valuation of startups is generally an entrepreneur dynamic inquiry, the initial price is made by the entrepreneur, and then the project and price to several industry investment companies. If an investment company thinks the price and the project match reasonably, an agreement will be reached;

In addition, the company in a round is often also relatively small, more difficult to rely on operating data to judge the specific valuation, the general domestic standard a round of financing are in 1 million-5 million U.S. dollars, but there are very few exceptions will reach 10 million U.S. dollars, the proportion of the average is about 20%.

A round of financing is generally insurmountable, but compared to the angel phase, there are some algorithms can be used as intuitive data support. A round of investors will be measured, ask the entrepreneur to get the money to reach the number of users, how long it will take to use, after the use of what can be achieved and the reasons for the calculation.

For example, Bertelsmann will log on to the Web site to do a real user experience before deciding to give the hook a round, and seek feedback on the use of the pull-back in the microblogging and recruitment hr. When it was confirmed that everything was OK, Bertelsmann decided to give the net the money.

B-round valuation: Company data + Market space

If the Angel round financing by the basic rules, a round of financing is based on the rules and some of the operating data to judge the valuation, then go to the B round of financing, the amount of each company's financing and valuation differences have been greatly different. "The role of regulation has become smaller, the role of the individual has become larger, at this time the basic valuation of the project to do good." Xu said.

When taking a round of financing, the use of Pull hook network recruitment of enterprises but thousands of, but only a few months after the B round of financing, in the pull online recruitment companies have broken through 20,000, and began to have companies willing to pay for recruitment. In addition, the recruitment efficiency of the 六、七倍 is also a traditional recruitment site, the average user of 3-5 resumes can participate in an interview, and every few interviews will be successful to get an offer.

The growth rate of the data itself, the improvement of the user experience, and the possibility of profit have further validated the feasibility of the entrepreneurial project in the business model.

In the second round of financing, investors will not go desperately to depress the price of the company, but consider how to help the start-up companies in the segment to achieve the first, get more than 50% of the market share.

In addition, from the start of the B-round financing, as well as the subsequent C-round, D-round before the listing of financing, are beginning to be open market of the same type of company's valuation as a certain reference and comparison.

For example, worry's market capitalisation is currently 2 billion U.S. dollars, pull the net because it is doing the vertical recruitment of Internet industry, market space will be smaller than worry, but the customer unit price is higher than the former. Investors through the market comparison, as well as the consideration of their own returns and other issues, the final determination of a financing amount and share ratio.

In general, VCs expect returns in the B round of 7, 8 times times or even 10 times times, if the return is too low, after the listing will be diluted a portion of the equity, then investors may not invest.

At present, the most invested institutions in the B-round are GGV (GGV capital) and SIG (Haina International Group).