I am about to embark on raising money. I am reasonably sure that I have constructed an accurate but very conservative 5 year plan.
If the cash flows are to be believed, I will now have to pin a value on shares.
So lets say that the net profit is as follows for the next 6 years (with year zero being this year where we have a negative cash flow because we spend lots!)
(not my real numbers, but similar pattern of growth)
What would be a ball park range for share value and why?
To keep it simple, all shares in the company are the same. all get equal votes and none have special status.
They'll be worth whatever an investor is willing to pay for them.
I know that sounds trite but it really is the truth. Assuming you found a few investors willing to invest they could be all over the place in terms of valuation. I've seen companies get valuations that varied as much as by 5x from different investors. You'll just have to see what offers you get and take the one that you like the most. Keep in mind that doesn't mean the most money or the highest valuation - plenty of stuff goes in to that relationship beyond money.
Also, net profit doesn't tell you much; is that $2mm profit on $3mm in revenue or on 100mm in revenue? Also, unless you have a ton of experience doing this exact thing most people aren't going to put much faith in your numbers. That being said, if this is a tech company, investors are going to want to see pretty big numbers at year 5. Otherwise there just isn't enough growth potential to make the risk worthwhile.
First off, no VC will want a deal unless they have preferred shares. So your evaluation should take that into account.
Second, don't be too conservative on your numbers. Most VC will mentally round down your numbers, so when you present, make sure you have the optimistic numbers. The one thing they always here is "These numbers are conservative." They don't want to hear that. They want to here "We will rule the world."
@Ryan Elkins is right when he says "They'll be worth whatever an investor is willing to pay for them." That's so true. What you should do is consider comps (comparable companies) in your industry. That's usually how they determine value.