Calculating Your Pre-Money Valuation

HELLOWorthworm takes the guesswork out of pre-money valuations (PMV) with sophisticated strategic analysis tools that are designed to provide a stronger, more credible starting point for investment negotiations between entrepreneurs and angel investors.

INTRODUCING WORTHWORM

STEP 1

To create your first venture, click the tab that says, “Step 1 | Create New Venture.” You can have multiple ventures, but we recommend starting with one.

CREATE A NEW VENTURE

STEP 2

Once you’ve created your venture, you can create models to test how different business factors and decisions could affect your PMV.

To create a model, click the tab that says, “Step 2 | Start New Model.” Type the name of your model into the open box, and click “Save.” (Don’t worry, you can always change the model name later.)

START A NEW MODEL

STEP 3

Your PMV calculation starts with a guided questionnaire that includes more than 70 questions focusing on key valuation drivers of your business.

Your answers power Worthworm’s sophisticated algorithms, which provide a sound, defensible PMV and help you think through vital questions that contribute to your venture’s success.

COMPLETE QUESTIONNAIRE

STEP 3

Here’s how to complete the questionnaire:

1. Go through the questions about 9 aspects of your business, selecting the answer to your question on the left and your confidence in that answer on the right (if requested). You can start and stop at any time if you don’t know the answer to a question or want to come back to it later.

COMPLETE QUESTIONNAIRE

STEP 3

2. When you’re done with a section of questions, click “Continue” at the bottom of the page to move on to the next section.

3. Once all of the sections have been completed, click “Calculate” to calculate your estimated PMV.

COMPLETE QUESTIONNAIRE

STEP 4

Your answers go through an algorithm that uses almost 1,100 analytic parameters and over 4,000 outputs, blends the most respected valuation methods, and compares your ventures with third party research about companies at the same maturity level.

The result is a credible estimated PMV that any investor or entrepreneur can feel confident sharing and defending.

CALCULATE MY PMV

STEP 4

Click “Step 2 | My PMV” to see your PMV displayed on a valuation bar with an arrow.

The arrow indicates your current estimated PMV, and the valuation bar illustrates how much higher or lower it could be based on operational and other risks, including the levels of confidence you expressed while answering the questionnaire.

UNDERSTANDING YOUR PMV

Maximizing YourPre-Money Valuation

OVERVIEW• Before you can form a plan to increase

your pre-money valuation (PMV), it’s critical to consider all the factors that drive your valuation, as well as which steps you’re most willing and able to take in order to increase it.

• Think about this question: Are you more likely to invest time, capital, or both to strengthen your business? ✓ If your answer is “time,” use the Risks

Tool to see how dedicating time to reducing uncertainty could improve your PMV.

✓ If your answer is “money” or “both,” use the Risks and Opportunities Tool to see how investing time in reducing uncertainty and money in pursuing opportunities could boost your PMV.

• Finally, Worthworm’s Next Steps Tool and Self-Directed Next Steps Tool help you develop a strategy with various combinations of steps you could take to minimize uncertainty, maximize opportunity, and increase your PMV.

MAXIMIZING YOUR PMV

ANALYTIC TOOLSThe first analytic tool you can use is the Risks Tool, which shows the areas of your venture that present the most uncertainty.

To access this tool, click the downward arrow next to “Step 3 | Maximize My PMV,” and select “Analysis | Risks.”

RISKS TOOL: WHAT IS IT?

ANALYTIC TOOLS1. This tornado diagram identifies

the areas where investing time could reduce uncertainty and increase your PMV. The long bars need more attention, and short bars need less.

2. To boost your PMV, focus your efforts on decreasing uncertainty in the areas with the longest bars.

3. Click each bar to view the questions used to determine the bar’s length and a pie chart showing the weight of each question for that valuation driver. Next, click “View/Edit Answer” to change your answers, then “Save Edit(s)”, and finally “Calculate” in the upper right corner to see how those changes affect your PMV.

RISKS TOOL: HOW DO I USE IT?

ANALYTIC TOOLSThe Risks and Opportunities Tool combines the risk analysis from the previous tool with an overview of the areas that present the most opportunity for your venture.

To access this tool, click the downward arrow next to “Step 3 | Maximize My PMV,” and select “Analysis | Risks and Opportunities.”

RISKS & OPPORTUNITIES TOOL: WHAT IS IT?

ANALYTIC TOOLS

1. This tornado diagram identifies the aligned areas where investing time in minimizing uncertainty and money in maximizing opportunities could increase your PMV. The long bars need more attention, and short bars need less.

2. To boost your PMV, focus your efforts on decreasing uncertainty and taking advantage of opportunities in the areas with the longest bars.

3. Click each bar to view the questions used to determine the bar’s length and a pie chart showing the weight of each question for that valuation driver. Next, click “View/Edit Answer” to change your answers, then “Save Edit(s)”, and finally “Calculate” in the upper right corner to see how those changes affect your PMV.

RISKS & OPPORTUNITIES TOOL: HOW DO I USE IT?

STRATEGY TOOLSOnce you’ve analyzed ways to minimize risk and pursue opportunities, the Next Steps Tool helps you develop a strategy with various ways you could invest resources to increase your PMV.

To access this tool, click the downward arrow next to “Step 3 | Maximize My PMV,” and select “Strategy | Next Steps.”

NEXT STEPS TOOL: WHAT IS IT?

STRATEGY TOOLS1. This is a powerful

visualization tool that focuses your resources and

prioritizes your efforts on the factors that you’re most

willing and able to address.

2. First, think about whether you want to invest time,

money, or both to maximize your valuation.

3. Then, choose the Risk View

tab if your answer is “time,” Value View tab if your answer

is “money,” or Next Steps tab

if your answer is “both.” In

each of those tabs, click on

the dots (which represent combinations of key

valuation drivers you could focus on), and see how acting on those items could change

your PMV.

NEXT STEPS TOOL: HOW DO I USE IT?

STRATEGY TOOLSNEXT STEPS TOOL: HOW DO I USE IT?

4. When you find a dot that

represents something you’d

like to focus on, click

“Designate as a Priority Step” to bookmark it as an action item for your team. You can

also use the table to sort and view the same information.

5. If you want to edit your answers in the questionnaire and see how those changes

affect your PMV, go to the Questionnaire, adjust your

answers, click “Calculate,” and

return to the Next Steps Tool to see how the dots and

recommendations change.

STRATEGY TOOLS

If you would rather manually choose the next steps to take, use the Self-Directed Next Steps Tool by clicking the downward arrow next to “Step 3 | Maximize My PMV” and selecting “Strategy | Self-Directed Next Steps.”This tool allows you to choose up to two actions at a time, prioritize their order, and see how taking those steps could affect your PMV.

SELF-DIRECTED NEXT STEPS TOOL: WHAT IS IT?

STRATEGY TOOLS

1. Select one item from the drop-down menus under “First Step” and one item from the drop-down menus under “Second Step.”

2. A decision tree will appear that shows the range of possible valuation outcomes depending on which items you act on.

SELF-DIRECTED NEXT STEPS TOOL: HOW DO I USE IT?

Viewing and DownloadingWorthworm Reports

OVERVIEWBASIC AND FUNDING REPORTS

In addition to helping you calculate and maximize your pre-money valuation (PMV), Worthworm offers a number of reports that you can view, download, and share.

To download any or all of these reports, click the tab that says, “Step 4 | Download Reports.” Then, select the report(s) you would like to download.

REPORTSThe PMV Report is an overview of your current estimated PMV, a snapshot of where the venture lies with respect to several key valuation drivers, all questions from Worthworm’s questionnaire, and your answers to them. It offers a comprehensive understanding of the inputs underlying your venture’s given model and its corresponding PMV calculation.

PMV REPORTBRONZE

SUBSCRIPTION

REPORTSThe Snapshot Report consists of six charts that illustrate where your venture currently stands with respect to certain investment criteria.

SNAPSHOT REPORTBRONZE

SUBSCRIPTION

REPORTS

The Inputs Comparison Report shows which answers differ between any two models of your venture and the estimated PMV for each one.

INPUTS COMPARISON REPORTBRONZE

SUBSCRIPTION

REPORTSThe Capitalization (Cap) Table details both the past round(s) and current round of funding for your venture and also reflects the number and details of future rounds before experiencing an exit event.

CAPITALIZATION TABLESILVER & GOLD SUBSCRIPTION

REPORTSThe Equity Dilution Report illustrates the estimated dilution in ownership each funding round’s investors would experience in future rounds of financing for your venture.

EQUITY DILUTION REPORTSILVER & GOLD SUBSCRIPTION

REPORTSThe Return on Investment (ROI) Report illustrates the estimated gross cash-on-cash return each funding round’s investors would receive from a projected exit event.

ROI REPORTSILVER & GOLD SUBSCRIPTION

GET STARTEDReady to calculate your venture’s PMV and learn the best ways to maximize it?

Start using Worthworm, and get in touch with us if you have questions or feedback.

info@worthworm.com

888-429-2530

TRY WORTHWORM TODAY