Worthworm helps entrepreneurs and angel investors establish a reasonable and defensible starting point for investment negotiations
SCOTTSDALE, Ariz.–(BUSINESS WIRE)–October 24, 2013–
Worthworm, the most rigorous, web-based valuation system for entrepreneurs and angel investors, today announced its public availability. Designed to answer the demand for an easy-to-use, web-based system that will generate a realistic, defensible and credible pre-money valuation (PMV) for early stage ventures seeking investment from angel investors, Worthworm is the only tool of its kind to facilitate negotiations between entrepreneurs and investors based upon a pre-money valuation in which both parties can have a high degree of confidence.
“The reality is that there has not been a reliable, simple, or cost-effective way to calculate an early stage company’s valuation – which is why so many entrepreneurs and angel investors get it wrong,” said Alan Lobock, co-founder of Worthworm. “The alternatives to Worthworm are spending hours upon hours customizing a spreadsheet that a seasoned investor is unlikely to accept as credible if for no other reason than the valuation method applied, or spending thousands of dollars with a valuation firm. When you are clocking 80-hour weeks building your start-up from the ground-up on limited funds, neither of those options are attractive. Worthworm is designed to fill the market void, providing users with an affordable, rigorous, web-based valuation system that derives a reasonable and defensible pre-money valuation from which entrepreneurs and angel investors can begin negotiating.”
Worthworm applies to a user’s data a blend of the valuation methodologies widely accepted by seasoned angel investors, third-party valuation comparables and proprietary real-options technologies to go beyond providing just a reliable PMV. Instead, armed with data from the system, Worthworm users will also gain a deeper understanding of what risks can be mitigated and what opportunities can be exploited to rapidly increase a venture’s value for the benefit of its owners. In order to help entrepreneurs create the most comprehensive valuation and for angel investors to standardize a portion of their due diligence process either in the screening phase or later, the Worthworm system includes:
- Guided Questionnaire – The first step in Worthworm’s valuation process requires users to answer more than 70 questions focused on the key valuation drivers of an early stage company. Entrepreneurs are compelled to think like investors to complete certain sections of the questionnaire, which will better prepare them for pitches and meetings with prospective investors.
- PMV Report – With nearly 1,100 analytic parameters and more than 4,000 outputs, Worthworm delivers a PMV Report for each completed questionnaire. The report provides a summary description of the venture, its PMV placed upon a valuation bar that estimates how much higher or lower the PMV could be based on market risks, graphs illustrating where the venture places with respect to key valuation drivers, and all of the questions and their answers to ensure full transparency between entrepreneurs and investors.
- Interactive Tools – After calculating a PMV, users also have access to a suite of additional tools that help entrepreneurs and angel investors maximize the venture’s PMV. These include the Risks Tool, which identifies in the form of a tornado diagram areas of uncertainty within the venture that could be mitigated to increase the company’s PMV; the Risks and Opportunities Tool, which highlights areas of opportunity in which the venture could invest to increase its PMV and compares these available increases to those to be gained by mitigating uncertainties, and The Next Steps Tool, which analyzes the key valuation drivers in a way that allows the user to develop strategies and tactics to maximize the venture’s PMV.
- Reports – Worthworm generates a number of comprehensive reports that can be quickly and easily downloaded and shared with stakeholders or investors. The reports highlight such key information as the venture’s projected capitalization table, equity dilution, and potential return on investment. Users can also invite prospective investors and/or stakeholders to their Worthworm account, where they may engage in what-if analyses or model the venture differently to derive a scenario on which all parties may agree for purposes of proceeding with an investment or implementing selected strategies and tactics.
Worthworm was also designed with angel investors in mind. Given the recent lift of the General Solicitation ban, the number of U.S. investors considering early stage venture funding is expected to rise.
“Worthworm is one of the strongest tools in an investor’s arsenal, providing them with a consistent framework with which to standardize the screening process or later due diligence,” Alan said. “If you are an angel investor and a venture is seeking capital from you, insist on getting its Worthworm report. And if you make an investment, insist that the venture update its Worthworm report throughout the year so you can track its performance with respect to key valuation drivers and evaluate its strategies based upon the venture’s changing risk and opportunity profile.”
As part of a lengthy beta process, dozens of angel investors and directors of top-ranked entrepreneurship programs at universities across the country have seen Worthworm’s capabilities.
“Worthworm is a tool every entrepreneur should be using to prepare for meetings with potential investors,” said Ken Jones, Director of Undergraduate Programs at The University of Houston’s Wolff Center for Entrepreneurship (ranked the number two undergraduate entrepreneurship program in the nation by the Princeton Review.) “I have the responsibility to identify tools for our students that not only contribute to their education in entrepreneurship, but will serve them well when they graduate from our program. Worthworm is exactly that. Through its use, student-entrepreneurs get to see their ventures through an investor’s eyes, gaining an understanding of the varied issues that raise or lower a venture’s value. Upon graduation, these same students will be able to confidently pursue funding for their ventures armed with credible and defensible pre-money valuations and related analyses that any investor would find insightful and reliable.”
To trial Worthworm or to purchase a subscription, please visit www.worthworm.com.
Worthworm is the most rigorous, web-based valuation tool for early stage companies seeking angel investment. The web-based tool incorporates widely accepted valuation methods, third-party valuation comparables, and proprietary technologies to provide users with a credible, defensible pre-money valuation with which to enter into negotiations. For angel investors, Worthworm’s questionnaire standardizes a portion of the due diligence process, whether used as a screening tool or for future analysis. After investment, Worthworm becomes a strategic management tool helping entrepreneurs and angels evaluate opportunities, risks, and strategies amid the venture’s changing circumstances. For more information, please visit www.worthworm.com.
Kate Ryan/Heather Dinolfo, 646-571-0120