Startup Advisory Services

Our team has worked with numerous early-stage companies, some of which have grown to become market leaders. Our team members have a diverse and significant track record working with entrepreneurs.

We understand the nuances pertaining to early-stage companies

• Presence of complex capital structures, ratchets, liquidation preferences, tag along and drag along rights and other terms that are common in early-stage company investments
• Implication of these terms for the relative value of various layers of preference and equity shares within the capital structure
• Knowledge of how to apply Black Scholes, binomial lattice and Monte Carlo simulation methodologies as well as the appropriate circumstances in which to apply these methodologies
• Challenges associated with developing financial projections and estimating cost of capital in highly uncertain, rapidly evolving markets, for young companies with new products and/or unique business models

Our fee structure is suitable for most emerging growth companies and startups.

The Kroll Advantage

• Largest and growing network of PE and VC clients globally
• Rich experience and understanding of early-stage companies and their nuances
• Global firm with operations across 25 countries
• Willing to invest in a long-term strategic relationship through proactive service and competitive pricing

Key Services

Valuation Advisory Services

• Development of financial projections /financial model review
• Employee share-based payments valuation, including options, RSUs, PIUs and other structures
• 409A valuations, business valuations to support capital raises or investment decisions, tax valuations
• Valuation of intellectual property (IP), including patents, trade secrets, data, and pharma/biologic pipelines
• Analysis of alternative monetization strategies (licensing, sale, collaboration, etc.) and structures (earnouts, milestones, etc.)

Forensic Investigations and Intelligence

• Market entry support
• Competitor intelligence
• Cyber security and resilience

ESOP Advisory

• Assistance with structuring of ESOP plans
• Financial impact analysis
• Tax implication of ESOP plans

Transaction Advisory Services

• Buy-side diligence – Quality of earnings/cash flows/working capital analysis, etc.
• Sell-side diligence – Run rate analyses, independent evaluation of recurring EBITDA, etc.

Startup Advisory Case Studies

Case Study 1: Developing Financial Projections and a Valuation to Support an Internet Startup’s Capital Raise

A fintech startup had an innovative way to service an established market, and the potential to expand both globally and into new applications. With only a rudimentary forecast in hand, our client needed to value its business to support fund-raising or a potential sale. We developed more credible revenue and cost projections relying on a combination of clearly articulated management assumptions, historical results, and industry data. Based on these projections and exit multiples, we valued the business. Our client received more than just a defensible valuation – our work also provided insights into the business: which revenue sources are most important, what are the key business drivers, how fast might the company grow and why, and how many staff would be needed over time. Our client was subsequently able to raise a substantial amount of capital.

Case Study 2: Valuation of Complex Capital Structure for PE-backed Pre-IPO Pharmaceutical Startup

Our client, a private equity backed startup with 12 early stage assets spun out from Big Pharma, needed valuations of its preferred stock, funding obligations, options to increase equity participation, and employee stock options for financial reporting purposes. We reviewed, benchmarked, and provided feedback for our client to improve their financial projections model, and leveraged the updated projections as a basis for the valuation. Our client used our valuations to support its processes for going public through a SPAC.

Case Study 3: Valuation of Investment Opportunity in a Startup

Our client, a minority owner in a company launching an innovative technology, asked us to value options it had to either increase its equity ownership or to acquire the company outright. The target’s management and two investment banks had valued the company at roughly $600 million. After interviewing the target’s management and reviewing the company’s marketing and launch plans, we determined that some critical assumptions were overly optimistic. Our valuation was about half that of the others. We also quantified the key uncertainties, revealing there was only a 20% chance that the business value would prove to be as high as $600 million. Three months later, the technology’s market share was within the range we had estimated, significantly behind the pace that the banks had anticipated. Our client found our valuation credible and, when integrated with our modeling of the options, a solid basis for decisions on the investment opportunity.