Zhang Jiahong interjected at this time and said: "Isn't stock speculation about the price-earnings ratio? This is what VCs pay attention to, and it is also commonly used, right?" Some time ago, I had a lot of contact with VCs, and Zhang Jiahong also learned one or two professional words, such as this price-earnings ratio.

Qin Fangyuan took the opportunity to lift Zhang Jiahong: "Mr. Zhang, you are right, this price-earnings ratio is used a lot in the capital market now, which is generally the income method. P/E is the price divided by the profit, which is called the P/E ratio. For example, the average price-earnings ratio of listed companies on the domestic GEM is 100 times, which is recognized by the market. If your company is similar to these listed companies in all aspects, you can theoretically value your company according to this multiple. For example, if your company made a profit of 10 million yuan last year, the company's valuation is 1 billion yuan. Of course, this is impossible, because you are not listed, and the VC will greatly discount the P/E multiple in order to make money, and it would be good if he was willing to give you 10 times.

"Theoretically, the income approach determines the value of an assessee by capitalizing or discounting the expected earnings of an assessee to a specific date. It is based on the discount theory in economic principles, that is, the value of an asset is the present value of the future earnings that can be obtained from using it, and its discount rate reflects the rate of return on investing in the asset and earning income. The main methods of the income approach include the discounted cash flow method (DCF), the internal rate of return method (IRR), the CAPM model (capital asset pricing model) and the EVA (economic value added) valuation method. ”

Zhang Jiahong was a little deflated when he heard this, and said: "Then according to our previous net profit, I'm afraid I can't estimate a few dollars." ”

"Don't worry, Mr. Zhang, God closed a door for you and also opened a window for you, the so-called east is not bright and the west is bright. When we found that the P/E valuation was not suitable, the market introduced another valuation method, which is the market comparison method. Qin Fangyuan relieved Zhang Jiahong and encouraged him.

"The market comparison method is the most realistic method, which is to compare the value of the appraisal object with the equity assets such as enterprises, shareholders' equity, securities, etc., which can be referred to or have transaction cases in the market to determine the value of the appraisal object, and its application is based on the assumption that similar assets in a complete market will have similar prices. Just like selling apples in a fruit market, your apples can't be much more expensive than other people's apples. The commonly used methods in the market method are the comparative method of referring to the enterprise comparison method and the comparative method of M&A cases.

"Obviously, for us to remember the media, the market comparison method is very suitable for us, there are listed companies such as Focus Media, Huashi Media and Hangmei Media to compare; even if it is not listed, there is also Yanhuang Health Media to make comparisons, this company that does hospital LCD screen media has a good market value, and there are two rounds of investment by four VCs.

"Each of these assessment methods has its own correlation and pros and cons. The income method and the cost method focus on the development status of the enterprise itself, but the difference is that the income method focuses on the profit potential of the enterprise and considers the time value of future income, which is based on the present and looks to the future. Therefore, for enterprises that are in the growth or maturity stage and have stable and lasting income, it is more appropriate to adopt the income method. The cost method is a true assessment of the current value of the enterprise by considering the existing assets and liabilities of the enterprise, so it is appropriate to use the cost method for valuation when it comes to a holding company that only invests or only owns real estate, and the valuation premise of the enterprise is discontinued operation.

"The market method is different from the income method and the cost method, and shifts the focus of the valuation from the enterprise itself to the industry, completing the transformation of the valuation method from the inside and outside. Compared with the other two methods, the market method is more simple and easy to understand, and its essence lies in seeking a suitable benchmark for horizontal comparison, and the application advantages of the market method are highlighted when the target enterprise is a potential enterprise and the future income is uncertain. ”

Zhang Jiahong didn't seem to understand it, but he felt that his head was big: "Can there be an intuitive case?"

When Qin Fangyuan heard this, he knew that he was too bookish and angry, and he didn't need to talk so much, so detailed: "The acquisitions that have occurred in China in recent years, such as Gome's 3.6 billion yuan acquisition of Beijing's Dazhong Electric Appliances, are premium acquisitions, while in the United States, Google spent $1.65 billion to acquire the video website YouTube, which did not make money at that time. Maybe this comparison is not very appropriate, Dazhong Electric has dozens of chain companies, although they were sold to Gome for a high price, but compared with the asset-light YouTube, we can see at a glance: the valuation of the YouTube website is as much as three times that of Dazhong Electric, why?

Shi Wenqing interjected: "Huaxia Zhongding served a project before, which was in a leading position in the market segment and had great development potential, and the valuation of the investment institution at that time was 40 million US dollars. After a reshuffling of the business and the bright spots, the project is valued at $80 million. In the end, the valuation in the financing agreement was basically calculated on the basis of $80 million. ”

Qin Fangyuan continued to draw Zhang Jiahong and drew a tree on the whiteboard: "We can use analogy to illustrate." Compare the company to a fruit tree, and the fruit on the tree is the fruit of the past. This fruit, at a specific time, speaks in time about the health of the tree. The fruit on the tree is like profit, the fruit of the efforts of the past season, and this fruit is visible.

In the same way, we can liken the branches of a large tree to a company's balance sheet and income statement, which reflect the company's past and present health.

"The tree's ability to bear fruit in the future is for the company its ability to generate profits or positive cash flow in the future.

"In order to understand and predict the future of the company more comprehensively, we must analyze the underground part of the tree, that is, the roots of the tree, as well as the external conditions, such as rain and sunlight, which affect the survival of the tree. When dealing with or analyzing companies, we use a similar method of reasoning. ”

Although Zhang Jiahong didn't seem to understand these professional words, he still felt a little refreshed in his heart: it seems that it was right to follow Shi Wenqing's advice and spend a lot of money to bring Qin Fangyuan back from the United States, and he has to obey, professionalism is power!

That night, Zhang Jiahong happily emailed the business plan to Lao Yan, a Series A investor.

Lao Yan flew back from ** the day after seeing the business plan, he didn't go back to his office, and went directly to Mingming Media in Oriental Plaza. As is often the case, it is rare for a hardcore investor like this to patronize a small business so impulsively.

When Qin Fangyuan was called to the small conference room, he was very surprised to see Lao Yan! He rushed forward in three steps and two steps, holding Lao Yan's hand tightly: "Hello senior brother!"

Lao Yan laughed and stared at Qin Fangyuan for a long time: "The future is terrifying! Chairman Zhang praised you to me on the phone for a long time, and Li Hong also said that you have a little junior brother who can become a great weapon, and you must know him." Yesterday, I read the B round of financing BP submitted by you, which made us old things have the urge to invest when we see it. ”

This sentence flattered Qin Fangyuan, he knew that such a high evaluation was a pity for this hardcore old-timer in the investment world, and the frequency of use was extremely low. Zhang Jiahong was even more overjoyed when she heard this, what she saw from it was white flowers, and she recognized that as long as Lao Yan said yes, she would basically not be far from success.

Then they got straight to the point.

Lao Yan said: "You have used a lot of space and data to calculate that the internal rate of return of investment reaches 60%, which is quite a high data. This should be calculated by the VCs themselves, and the general business plan does not provide this, but I think it is better to keep this so that investors can see it at a glance - of course they will calculate it again internally. ”

Qin Fangyuan said: "Mr. Yan, I know that IRR is an indicator that VC and PE are very concerned about. Judging from the financial forecasting model of the company we have built, the IRR is promising, and I am sure that the VCs will give it a positive evaluation. ”

"That's right, IRR is the result of a fund at the end of the day, and they are more interested in the return multiple. For example, if a VC invests in 10 projects, the possible result is that 4 of them die, 2 of them can recover their investment, 3 of them get 2~5 times the return, and one succeeds (more than 10 times the return). Practice has proved that the most effective way to invest in venture capital is to expect 10 times the return for each early-stage project, and 3~5 times for the mature project. For early-stage projects, if the entrepreneur aims for a 40% IRR, the investor may be able to get a 5x return, but it can't compensate for the losses of 4 failed and 2 tied projects, and a 10x return is required. Therefore, when trying to convince VCs to invest, entrepreneurs need to show them how to achieve a 10x return instead of a 60% IRR. ”

Zhang Jiahong only listened to these professional discussions, but she was not interested. In this interesting discussion, she was a little sleepy. When I looked at the watch, it was broken, and the beauty salon was closed again at this point in time. It seems that entrepreneurship is really not done by women, and it has been reduced to the point where as long as the temperature is not demeanor.

More than three hours of discussion passed in the blink of an eye. Lao Yan is most concerned about the return multiple, according to the data calculated by Qin Fangyuan and Shi Wenqing, it can reach more than 25 times in the next three years, and he will naturally be satisfied.

Before leaving, Lao Yan said to Zhang Jiahong: "If your company can complete 2/3 of this business plan, there will be no problem in going public in the United States; of course, there is no problem with financing." ”

Qin Fangyuan stood up and said solemnly to Zhang Jiahong and Lao Yan: "Two bosses, I have a request, you don't think it's suitable." ”

They stopped when they walked to the door of the conference room, and Qi Qi turned his head to look at Qin Fangyuan: "What's the matter?" ”

"This financing, if you two are reassuring me, I think I need to be fully authorized except for the key terms that you will decide, so that I will be more efficient and flexible in the front-line negotiations. ”

Zhang Jiahong and Lao Yan glanced at each other, still Lao Yan and Lao Yan: "There is no problem with this! However, we need to determine a few bottom lines, as long as we do not break through this bottom line." ”

"I agree with Mr. Yan's opinion, and Huaxia Zhongding Company is also coordinated by you. Our bottom line is the financing amount and equity transfer ratio, and the rest is given to you with full discretion. Zhang Jiahong also expressed his position.

Listening to the words of the two, Qin Fangyuan was relieved, just like the general got Shang Fang's sword before he set out on the expedition, and those who disturbed military discipline could be cut first.