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Start-up Valuation: Comparables 2011 Methods:

Searches were performed for:

Pre-existing open source reports; web searches and TechCrunch

Bio/Pharma companies & ICT/Software Tech companies.

2 – 10 employees.

No older than 10 years from founding date.

Data available on an early stage funding round (Seed to Series A).

Companies with 1st round funding below $100k were eliminated.

Funding was converted to CDN$ using Sept 23, 2011 currency rates (for UK and EU companies).

US$ was not converted to CDN$ as they were near parity at time of analysis

The first four tables are Bio/Pharma based and table five is ICT for comparison. Although Bio/Pharma

obtained higher valuations, the multipliers appear to be similar for ICT/Software.

Additional Resources:

http://www.business-valuation.net/small-business-valuation/ Good (works with forecast income)

http://www.stanford.edu/class/e140/e140a/content/valuation_note.html Realistic & short (Stanford U)

http://www.antiventurecapital.com/valuation%20resources.html Anti-Venture Capital

http://techcrunch.com/2010/04/04/top-vcs-debate-rising-startup-valuations-video/ Video of VCs

debating valutation

http://www.caycon.com/valuation.php Fun reality check for most Start-ups

http://www.developmentcorporate.com/2009/09/04/could-someone-please-get-robert-scoble-to-pee-

in-a-in-a-cup-twitter-can%E2%80%99t-be-worth-5-billion/ Twitter/Google/MS valuations (pee in a cup)

http://www.strategicvaluationassociates.com/ccsample/ccsample1.html (Example Valuation Report)

http://www.freevaluationsonline.com/ (Interesting ‘fill in the blanks’ app)

http://www.fastbusinessvaluations.com/business-valuation-calculator.html (if you have revenue)

http://v1.theglobeandmail.com/v5/content/calculator-smallbiz/calculate/?what=BusinessValuation

Underlying Assumption: Your revenue projections are CREDIBLE & ACCURATE!

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Results (Bio/Pharma first, then ICT/Software):

The search included tech based companies with no significant regulatory hurdles. Bio/Pharma data is separated from ICT/Software data.

Companies were excluded if financing data was not available, if the primary business was service-based, or if the product did not appear to be near market entry.

Table 1. Bio/Pharma Private Early Financing Valuations (Millions CDN$).

Company Pre-Money Raised Post-Money Stage

Adhezion 2.8 5.2 8 Start-up

Disc-Motion 29.15 0.85 30 Development

Embrella 4 2.3 6.3 Development

Neuros 1.88 1.42 3.3 Pre-Clinical Trial

Pill 3 0.5 3.5 Development

Xlumena 4.85 6.15 11 Development

SOURCE: KF Wells Investment Bankers (Texas) 2010.

Average Pre-money valuation: $7.6 million. If the outlier (Disc-Motion) is excluded: $3.3 million.

Table 2. M&A Comparables. Restricted to companies which provided a Revenue Multiple.

Target Acquired by Price (Millions$) Revenue Multiple

Advanced Medical Abbott 2,719 2.3

CoreValue Medtronic 850 24.3

Advanced Bionics Sonova Holdings 494.2 4

Vnus Medical Covidien 395.9 3.7

Cervitech NuVasive 96.2 59.8

Power Medical US Surgical 56.6 5.9

Candela Syneron 26.9 0.2

Alveolus Merit 19 2.3

Ethox Moog 15.1 0.6

US Respiratory Worthington 9.7 0.3

Innovative Spinal Theken Spine 9.3 4.2

MEAN 101.5 4.9

MEDIAN 16.5 3.0

SOURCE: KF Wells Investment Bankers (Texas) 2010. All M&As occurred in 2009.

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Table 3. KF Wells Investment Bankers applied four valuation methods to a model, pre-revenue medical company using the same input data and obtained the following results:

Analysis method Valuation obtained (Millions$)

Comparables-Private 19.3

Comparables-Public 7.2

Comparables-M&A 23.4

Discounted Cash Flow (DCF) 56.2

The final Valuation for the company was $8.5 M. The value was defended as being consistent with the “current market conditions” (2010). Note that the DCF remains a popular initial method that does not seem to correlate well with actual results for 2011.

Multiples

“Calculated Valuation” is calculated from known (disclosed) funding. This value was selected from

published data for known companies where the Funding $ amount is publically known and the pre-

money Valuation is publically known and published. Interestingly, the valuations were consistently ~10x

the funding round, or ~2x - 3x expected revenue for the upcoming year (one year forward).

Funding reported as ‘Grant’, ‘Seed’ or ‘Angel’ are entered as ‘Seed’. Funding reported as ‘Series A’ or

‘Unattributed’ were ended as ‘A’

Results: from TechCrunch.com

Table 4. Bio/Pharma examples from 2011 data.

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Table 5. ICT/Software examples from 2011 data.

Discussion:

Sample Valuations (pre-money)

1. Comparables (anticipated revenue multiplier based) valuation (from Table 2).

Assuming products with anticipated annual sales of $1.25 M, one year forward.

Value with 3.0x (Median) multiplier: = $1.25M x 3.0 = $3.75M

Value with 4.9x (Mean) multiplier: = $1.25M x 4.9 = $6.125M

Value with 2.0x (rule of thumb): = $1.25M x 2.0 = $2.5M

2. Comparables (Bio/Pharma) valuation (from Table 4).

Mean: $13,200,000 (CDN)

Median: $9,020,200 (CDN)

3. Comparables (ICT/Software) valuation (from Table 5).

Mean: $7,500,000 (CDN)

Median: $6,000,000 (CDN)

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APPENDIX: DETAILS FOR EXAMPLE COMPANIES USED

Biotech/Pharma

CiteHealth

CiteHealth reports on United States health care providers including hospitals, nursing homes, dialysis centers, drug & alcohol rehab centers, home care agencies, pharmacies & medical suppliers, and details on every community in the U.S.

Founded on 1/07. 5 employees Raised $768k in Angel round

NeuroVigil

NeuroVigil, Inc. is an early stage neuroscience company focused on the analysis of brain signal or EEG data, which currently is used in numerous medical applications but is not automated.

Founded on 2007 5 employees Raised $250k in Seed and Series A rounds

Erydel

Based in Urbino, EryDel has developed and patented a technology for drug delivery of pharmacological agents through erythrocytes (red blood cells). This process allow to easily load red blood cells with drugs, proteins, contrasting agents.

Founded on 2/07 7 employees Raised €2.5M in Series A round

Redbiotec

Redbiotec AG develops and produces multiprotein assemblies. It specializes in producing virus-like particles (VLP), various types of protein complexes and single proteins, and VLP-based vaccines against various infectious diseases.

Founded on 11/06 6 employees Raised €312k in Unattributed round

Immunologix

Immunologix, Inc. develops and produces antibody-based therapeutics for various biological targets. It produces human monoclonal antibodies against viral, bacterial, and tumor antigens.

Founded on 9/08 5 employees Raised $200k in Unattributed round

Isolation Sciences

Isolation Sciences LLC, in developing innovative technological platforms, is positioning itself as a leader in developing unique innovative but practical solutions to meet market airborne containment needs and desires.

Founded on 1/05 3 employees Raised $212k in Seed rounds

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PneumaCare

PneumaCare is focused on development of products for diagnosis and monitoring of respiratory disease using novel 3D imaging technology, developed by the University of Cambridge. The Company’s first product is non–contact respiratory monitoring

Founded on 2/09 5 employees Raised £2.45M in Seed, Angel, Grant, and Unattributed rounds

UrgentRx

UrgentRx provides over-the-counter medications in an innovative fast-acting powder format, available in convenient, single-dose, credit card-sized packets for easier portability and accessibility. Initially developed for heart attack victims.

Founded on 1/10 4 employees Raised $1.6M in Series A round

Caterna

Caterna provides innovative treatment in the field of Ophtalmology (Amblyopia). A modern E-Health solution allows for the improvement of visual acuity while assuring a comfortable therapy at the patient’s home.

Founded on 6/10 5 employees Raised €650k in Unattributed round

Isentio

Isentio was founded in 2005 and is based on research done on advanced DNA analysis methods by the three founders, Øyvind Kommedal, Øystein Sæbø and Bjarte Karlsen.

Founded on 2005 5 employees Raised $1.5M in Unattributed round

Other Tech

RoboDynamics

RoboDynamics produces Telepresence Robots which enables remote participation by deploying a mobile robot as an avatar.

Founded on 9/03 5 employees Raised $600k in Seed and Angel rounds

Mezmeriz

Mezmeriz is building a tiny high-definition projector the size of a matchbook.

Founded on 11/06 5 employees Raised $2M in Unattributed round

Stillwater Supercomputing

Stillwater Supercomputing, Inc. designs and markets a compute accelerator for computational science. The compute accelerator is based on a specialized semiconductor device called the Stillwater Knowledge Processing Unit, or KPUTM.

Founded on 3/07 10 employees Raised $250k in Seed round

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StyleHop

StyleHop provides the fashion industry with a consumer-driven forecasting tool to capture value currently lost in markdowns. Scalable, fast-turnaround forecasts designed exclusively for the fashion industry.

Founded on 2009 6 employees Raised $570k in Seed round

Cerevo

Cerevo stands for Consumer Electronics REVOlution. The Tokyo-based company is active in both the web and consumer electronics fields.

Founded on 4/07 10 employees Raised $1.3M in Series A round

Qitio

Qitio produces wireless alarm systems which can be installed by everybody. Major feature is that the central of the each alarm system runs on a server operated by Qitio. The connection between the user’s alarm system and the server is made via GPRS

Founded on 11/09 4 employees Raised $500k in Seed round

Modular Robotics

Modular Robotics makes robot construction kits. By combining sensor, logic and actuator blocks, young kids can create simple reconfigurable robots that exhibit surprisingly complex behavior. roBlocks are self-describing, so they can provide helpful.

Founded on 2008 4 employees Raised $487k in Grant round

Mashed Pixel

Mashed Pixel develops applications that simplify our everyday lives. By pairing social-networking applications for SmartPhones, along with hardware, Mashed Pixel seeks to replace single-function gadgets—getting consumers one-step closer to mobile.

Founded on 10/09 5 employees Raised $100k in Seed round

ShadesCases inc.

ShadesCases provides ultra-thin, stylish cases that offer full device protection including screen and click wheel coverage.

Founded on 2007 4 employees Raised $110k in Seed rounds

Simpa Networks

Simpa Networks designs and markets high quality solar systems that are sold on a pay-as-you-go-basis to customers at the base of the economic pyramid (“BoP”).

Founded on 3/10 7 employees Raised $1.1M in Unattributed round

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EmergentDetection

Emergent Detection was founded in 2010 by Eric Fogel, MS, MBA and Keegan Hall, MBA. While completing their graduate studies at the University of Washington, the two met Dr. Aaron Falk, a PhD physicist with a specialization in optical systems.

Founded on 4/10 4 employees Raised $278k in Seed and Grant rounds

BoomBotix

BoomBotix is about fostering creativity and self expression. Founded in 2009 with roots in San Francisco’s urban art scene and the Tahoe action sports arena, the company made a merger of alternative art and sport.

Founded on 4/09 4 employees Raised $135k in Series A round

magnetU

It was only a matter of time before social desires became wearable.

Founded on 12/09 10 employees Raised $180k in Angel and Grant rounds

I Am Smart Technology

I Am Smart Technology manufactures, markets and sells the HG Smart Switch.

Founded on 1/08 10 employees Raised $750k in Seed round

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