Contents

Hypothesis Test

Key hypothesis to validate: the valuation is reasonable and at-market

What does good look like?

The valuation is reasonable and at-market. In practice, this means:

• The valuation reflects the level of uncertainty and risk consummate with the stage of the business
• The valuation is appropriate given industry and category benchmarks
• Equity share allocation is within the range acceptable for the investment stage

Questions to validate the hypothesis

Approach to valuation:

• What is the valuation and how has the valuation been arrived at?
• What comparables have been relied upon?
• What recent comparable transactions have been completed and what were the multiples?
• How much equity is being given up as part of the round (a function of valuation and funding ask)?

Sensibility of valuation:

• What range of returns can we expect from this investment?