How does debt affect your valuation? - Josh Loe

How does debt affect your valuation?

I am considering working a debt option into my fundraising plan after some potential investors raised concerns over equity only financing. My question is how does this debt affect valuation?

Let’s use an example of fundraising $1,000,000. Say you raise $600,000 from investors in a 30% equity offering and the remaining $400,000 in debt. Would your valuation be $2,000,000 ($30,000 per 1% share)? I understand this $400,000 in debt hits your Balance Sheet but how does it affect the valuation calculation?



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