Port communicationangel wheel、Series A、How is Series B valued at different stages of financing? When should we use which valuation method?，has always been a controversial issue in the industry。This article hopes to find the internal relationship between various valuation methods，and put forward some constructive opinions。angel wheel：The company was founded by a serial entrepreneur，Obtained angel investment at the beginning of its establishment。
Series A：1The company will obtain Series A later this year，At this time, the company’s MAU (monthly active users) reached 500,000，ARPU (single user contribution) is 0 yuan，Income is 0。A+ round：The number of users of the company has grown rapidly after the A round，Half a year later, the company received the A+ round，At this time, the company’s MAU reached 5 million people，ARPU is 1 yuan。The company started to have a certain amount of income (5 million yuan) because it started to monetize a small amount of traffic through advertising.。
Round B：1After the year, the company won Series B again，At this time, the company’s MAU has reached 15 million people，ARPU is 5 yuan，The company's revenue has reached 75 million yuan。ARPU keeps improving because companies are already advertising、Games and other methods have found effective ways to monetize。
C round：1The company will receive Series C financing later this year，At this time, the company’s MAU is 30 million people，ARPU is 10 yuan，The company is advertising、game、E-commerce、Membership and other various monetization methods are blooming.。The company's revenue at this time reached 300 million yuan，In addition, the company has begun to make profits，Assume a net interest rate of 20%，to 60 million。IPO：From now on, the company will maintain a steady growth of 30-50% in revenue and profit every year.，And listed one year after Series C。
This is the financing process of a typical excellent Internet company，Founded by serial entrepreneurs，Receive investment from famous VCs in every round，Listed around five years after establishment。From this company we，You can see the shadow of Internet companies such as Momo。How is the company’s valuation calculated for each round? Let's make some more assumptions，Let’s talk backwards in chronological order：After IPO listing，The public capital market gave the company a price-earnings ratio of 50 times。
Attentive and professional readers will react immediately，The investment value of this company's stock is not great anymore，PEG>1 (P/E Ratio/Growth)，It seems that the best time to invest is still in the private equity stage.，All the money was made by VCs and PEs。During the C round，Different investment institutions have given the company different valuations，Some are 50 times P/E，Some are 10 times P/S，Some are estimated to be worth RMB 100 per month，But the final valuation is 3 billion。
If you don’t believe me, you can do the math.。Each valuation method is logical：A company planning to be listed on the GEM is given a price-to-earnings ratio of 50 times，No problem；A typical Internet company gives a price-to-sales ratio of 10 times，Is it very popular in the United States? Or one user gave a valuation of $15-20，look at facebook、The valuation of several companies such as Twitter，Get some more discounts。
During the B round，Different investment institutions provide different valuation methods，Differences started to emerge：An institution will only value based on P/E，He gave the company a price-to-earnings ratio of 50 times，But the company has no profit，So the company valuation is 0；An institution is valued on a P/S basis，He gave the company a price-to-sales ratio of 10 times，So the company’s valuation is 10*075 million = 750 million；An institution is valued based on P/MAU，He gives each MAU 100 yuan，Therefore, the company’s valuation is 100 yuan * 15 million people = 1.5 billion。
different valuation methods，The difference is so big! It seems，At this time, the P/E valuation method has become invalid.，But P/S、P/MAU continues to apply，But the estimated price was twice as bad! Assume that the company finally chooses a middle value of 1 billion between 750 million and 1.5 billion.，Received investment from VC。
During the A round，P/E、P/S is invalid，But if we continue to value each user at 100 yuan,，The company can still have a valuation of 100 yuan/person * 5 million people = 500 million。There are relatively few VCs who can understand the company at this time.，Most VCs have many concerns，But the company chose a very high level、Dare to value based on P/MAU、VCs who also firmly believe that the company will generate revenue in the future，Received investment at a valuation of 500 million。
During the angel wheel，corporate user、income、No profit，P/E、P/S、If P/MAU is invalid, how is it valued? The company needs several million yuan to start，Because the founder is a famous entrepreneur，So VCs invested a little more，Then give me 20 million，Let’s talk about a ratio that shouldn’t be too little or too much.，20%，Finally sold at a valuation of 100 million。
Let's summarize，The valuation method of this Internet company’s angel round is to slap on the head；The valuation method for Series A is P/MAU；The valuation method for Series B is P/MAU、P/S；The valuation method for Series C is P/MAU、P/S、P/E；Maybe a few years after it goes on the market，Internet companies become traditional companies，Everyone will also value based on P/B (price-to-book ratio)!大家回想一下是不是大多数的融资都是类似的情况？
For Internet companies，The P/MAU valuation system has the widest coverage，The coverage of the P/E valuation system is the narrowest。here，Let me call this coverage system the order of the valuation system.。P/MAU is a low-level valuation system，Highest tolerance；P/E is a high-level valuation system，to the company
Require
Highest。
Different valuation methods lead to the same goal：Let's look at a formula：Net profit = revenue - cost
cost
=Number of users×Single user contribution-cost
cost
net profit(E,earning)income(S,sales)Number of users(ALWAYS)single user contribution(ARPU)Generally speaking，If the enterprise does not have E，You can also vote S；If there is no S，You can also vote for MAU，But in the end, we still hope that the traffic can be converted into income.，Income can be converted into profits。
different start-ups，are at different stages，Some are in the stage of desperately trying to expand the number of users.，Some are in the stage of racking their brains to monetize traffic.，Some belong to the stage where they are thinking about how to achieve profits every day.。However，Ultimately, everyone has to evaluate a company based on profitability.，At that time, different levels of valuation methods led to the same goal.。
Why do well-developed companies die in Series B?、"C round death"：Some companies have a large user base，But it always fails to convert into income，If you raise the next round (assuming it’s Series B)，Investors insist on valuation based on the high-end valuation system P/S，Then the company’s valuation is calculated to be 0，Can't raise funds，So there will be death in round B；Some companies have good revenue scales，But there is always no hope of profit，If in the next round of financing (assuming it is round C)，We are facing PE institutions that only value based on net profit.，They think the company’s P/E valuation is 0，The company cannot raise funds，Death in round C will also occur。
different economic periods，The scope of use of the valuation system will shift：in bull market，The valuation system will move backward，This can explain why many companies that have never made a net profit have obtained Series C in the past two years.、D round，Even the E round，And it is invested by traditional PE institutions，Because they downgraded，Start using the low-level tool P/S。
in a bear market，The valuation system will move forward，This can explain why since the second half of this year，Some companies with good revenue and user growth are unable to raise capital.，They can even only merge together to keep warm.，Because even many VCs
Require
Profit，Everyone has hidden the low-level valuation system。Secondary market policies have a clear guiding role：Why has China been lacking RMB VC? Part of the reason is，China’s public capital market only recognizes the high-end valuation system of P/E。
Let’s take a look at the GEM issuance rules：“(1)Profitable for two consecutive years，The cumulative net profit is not less than 10 million yuan...or(2)Net profit in the most recent year shall not be less than 5 million yuan，The operating income is not less than 50 million yuan..."。There must be so much profit，to be listed，Only then can it have value in the secondary market，This valuation system
Require
It's too high。
When an enterprise only has the number of users、Only income scale，Even if you have 1 billion users，Your revenue scale is 10 billion，As long as there is no profit，The valuations are all 0! So there are very few RMB VCs，There are many PEs，Because they responded to the government's call and only used the price-earnings ratio as a tool，Otherwise there is no exit channel! But US stocks、Hong Kong stocks have P/S test indicators，As long as it reaches a certain scale, it can become a public company and go public.。
If the company can be valued only on P/S for a considerable period of time after listing (it may still have to be valued on P/E in the end)，Will open up the development stage of most companies，Make every round of valuation smoother。
here，The inner connections and usage methods of various valuation systems have been explored.，I hope that all entrepreneurs and investor readers can apply these principles to walk between bulls and bears.、between rounds of financing，We hope that legislators and readers will pay attention to the power of various levels of valuation systems.，Actively improve rules to play their guiding role in innovation。
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