Startup Fundraising and Valuation Process: Analysis of a Real Case Scenario

Abstract

The goal of this thesis is to analyze the two main processes faced by startups, the fundraising process and the valuation process, the development of which are the basis of the services offered by any consultancy company. The traditional stages of the startup funding process are Pre-seed funding; Seed funding; Series A, B, and C funding; and eventually IPO. Each of these steps has precise goals and different types of potential investors. There are also some alternative strategies such as bootstrapping, crowdfunding, or classic bank loans which hide numerous advantages and disadvantages with respect to the traditional ones. Entrepreneurs and investors can generally use 5 different methods, 2 qualitative (the Scorecard method and the Checklist method) and 3 quantitative (the Venture Capital method; the Discounted Cash Flow method with Long-Term Growth; the Discounted CF method with Multiples), plus 1 additional method (the Dilutive method) to compute the pre-money valuation of a startup; this value added to the capital raised during the fundraising process determines the post-money valuation. The transition from theory to practice takes place in the last chapter, in which these two processes are applied to a real case, extracted from my internship at a consulting firm.