This is the third section of get rich numbers in snippet number two, we're going to cover seven steps to the money and give you a real example along the way, it's going to be a method that will apply to startups of all sizes. So don't be concerned, if yours doesn't seem to be about right, you'll find this will fit exactly. We're going to cover seven steps to the money in detail and I'll walk you through that as follows. We're going to pick the value at the time of liquidity where the investors can find the cash in the chips. And then we're going to go and value each prior year to the new enterprise. We're going to adjust the number of shares outstanding so that the right dollar amount per share and then customize the stock option pool.

Well then finished by returning and repeating these four steps until you're satisfied. It's like shaping that lump of clay again to become the statue you want. Then we'll take an examination at the fun part how much wealth is created. And after that, hey, it's just a matter of getting going with a story in numbers. First picking the liquidity value depends on the multiple you're going to apply to your sales for was our prior example. The actual number will depend on the industry you're in the future growth rate potential in your company.

What's in favor or not cyber security may be hot one year and cold the next. And remember the investors always thinking what's my alternative compared with what? such as investing in a public company. They will start at the end like a liquidity event and think from here to there. That's one of the secrets basters are focusing on that liquidity event. Regardless of what kind it is IPO or sale of company.

So are you IPO qualified? They will require on Wall Street, about $200 million of value for you to go public. translated to sales. That means that with a multiple of four, you'll need about $50 million of sales to get to the public offering stage. That means Wall Street needs about a $50 million sales company growing to be able to get you qualified to go IPO. For is a standard is expected and rather easy.

Frankly, a lot of companies will double that and sometimes five times that that's not unusual. It does depend. And by the time you get out there and use the actual number, Wall Street will tell you what the multiples will be. Focusing on the initial public offering for our example, we'll think it through that way. This liquidity event is going to generate $200 million of value for our example. Now that we valued the company at the end that's valued at each year, you're going to work backwards from that event to do so.

Starting at the end, and coming back to today is how they do it in the real world. They are discounting those dollars to get back to, in this case a $12 value 12 million in this case, compared with 200 million in year five. You need to adjust the number of shares after you've gotten those values each year. The goal is to get between 18 and $38 a share so there are enough shares for wall street to be able to trade In this case, we'll do 10 million shares for a 200 million valuation equaling $20 per share, which is between 18 and $38 per share. Now we're going to customize the stock option pool. To attract the top talent you'll need enough shares to be able to say, Hey, come on aboard, take a risk.

Let's go. There's a stock option pool arranged and quick up ready for you if you wish to use it. Typically, around 20% of the shares is reserved for a stock option pool. You may not use them all, or in some cases more. But it's a pretty good starting point. Then, done with that you returned to the first step and repeat the first four until you're satisfied.

After that, you can then continue And step six becomes look at the wealth created. Okay? Who owns what percent of the company? And what's the value for each percentage along the way, that pie sharing and the growth over time is what everyone is beginning to think about them as they consider coming to work for you as an employee or investing money in your business. After that, it's just a matter of getting going. And that's the exciting part, by the diamond get there and through the numbers, you'll feel feel awfully good about, Hey, come on, let's get going.

There you are. There are the seven steps. Now that may seem like a lot, but that's what all venture capitalists do. That's what all serial entrepreneurs are going to be able to go through and must go through to get the answers they need. Next, I'm going to take you through a real example in a lot of detail. For our fictitious company called newco Corp. We'll examine it in the fourth and final section.

Detailed dollar signs real money. Let's go there now.