Enterprise value (EV) and equity or market value (MV) are two different terms used in the determination of the value of a business. Enterprise value is the value placed on the net operating assets of a business by all stakeholders, whereas equity value is the value placed on all assets of the business less its net debt by equity holders.
When a business outgrows the funding provided by angel investors it might seek more substantial investment from a Series A funding round. The Series A round is often a trigger for the conversion of convertible loan notes and an increase in the stock options pool. The Series A capitalization table is used to show the effect on the percentage ownership of a business following these changes.
When a business has outgrown funding from family and friends it might seek more substantial investment from business angels to fund for example product development, prototype production and market research. The angel investors cap table is used to show how the current shareholders, including the founders, are diluted by the introduction of this seed investment.
When a business is in its early stages and has perhaps developed an idea but does not yet have a working prototype of its product or traction and revenue, it often needs to be funded by outside investment capital from family and friends or other pre-seed investors. The pre-seed investors cap table can be used to demonstrate how the founders are diluted by the introduction of this outside investment.
A stock options pool is created by a startup business in order to set aside sufficient shares to enable it to build up, incentivize and retain a team of key personnel. The effect of the stock options pool is to dilute the existing shareholders.
The startup cap table is a record of who owns what percentage of the equity of a startup business. Prior to any investment it simply represents the ownership of the founders and any equity awarded to the team including employees, consultants, and advisers.
This free equity investment Excel template can be used to estimate the amount of equity which an investor might require in order make an investment in a startup business. The calculator takes into account the return required by the investor and the number of years to exit.
Angel funding is used to provide a startup business with equity investment to fund growth. The angel investor is seeking higher returns for the risks involved and tries to limit the initial valuation placed on the business in order to maximize their equity percentage.
The capital structure of a business is the mixture of equity and debt it uses to finance its operations. The optimum capital structure is one which minimizes the weighted average cost of capital and thereby maximizes the valuation of the business.
New equity capital is included in the cash flow statement of the projection as a positive figure as it represents cash flowing into the business from investors. For example, if in year two the plan inject new capital of 5,000 to finance the purchase of new machinery, the figure of 5,000 should be included in the cash flow statement on the proceeds from the issue of new share capital line.
The convertible loan note calculator shows the effect on the capitalization table of new equity investment when this triggers the conversion of a loan note. The calculator takes into account the impact of any discount or cap contained within the convertible loan note agreement.