From: Marcus Webb <mwebb@brickfieldep.com>
To: Amanda Foster <afoster@brickfieldep.com>
Date: February 01, 2023 12:00 AM
Subject: Valuation adjustment - TechStart Inc.

**From:** Sarah J. Thompson, Senior Associate  
**To:** Michael R. Chang, Managing Director  
**Date:** October 12, 2023  
**Subject:** Valuation Adjustment for TechStart Inc.  

Dear Michael,

I hope this message finds you well. As we approach the end of Q3 2023, I wanted to discuss our ongoing assessment of TechStart Inc. Following our recent meeting with the executive team and the preliminary analysis of their Q3 performance, I believe we should consider an adjustment to their valuation.

As you are aware, TechStart has been facing increased competition in the cloud solutions space, particularly from companies like CloudSphere and DataWave. While their revenue growth has been impressive, with a year-over-year increase of 25%, we have noticed a significant uptick in customer churn rates, which have risen to 12% in Q3 from 8% in Q2. This could potentially impact our projected EBITDA margins, which we previously estimated to be around 30% for the next fiscal year.

Based on the updated financials, I have recalibrated our valuation model. Current projections indicate an enterprise value of approximately $150 million, down from our previous estimate of $175 million. This adjustment reflects a revised EBITDA multiple of 10x, taking into account market conditions and competitive pressures.

I recommend that we schedule a follow-up meeting with the TechStart team to address these concerns directly and explore potential strategies to improve customer retention, which may include enhancing their customer support services and investing further in product development. Additionally, we should discuss the possibility of restructuring our investment thesis to align with these findings.

Please let me know your thoughts on this matter, and if you would like to convene a meeting with the broader team to discuss this in greater detail.

Best regards,  
Sarah J. Thompson  
Senior Associate  
Equity Partners Group  
sarah.thompson@equitypartners.com  
(555) 123-4567