SoCal CTO

SEPTEMBER 27, 2011

I've talked about this topic before in How Investors Think About Valuation of Pre-Revenue Startups. But the more important rationale is raised in the following about why employees most often do not have significant outcomes even in fairly positive liquidity events. Same Value for Sweat Equity as Investment Dollars?

Early Stage 391

Early Stage Equity CTO Hire Sweat Equity 391

David Teten

AUGUST 21, 2019

Or should they look to one of the new wave of Revenue-Based Investors? Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. For more background, see Revenue-Based Investing: A New Option for Founders who Care About Control. But should they? Aligned incentives.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

Startup Professionals Musings

AUGUST 17, 2014

Aggressive revenue projections and growth rate. Revenue in the fifth year should be at least $20 million, with a growth rate average of 100% per year. In other words, revenue projections are not the place to be too conservative or wildly optimistic. Gross margins greater than 50%. Show red ink to match your funding request.

Liquidity Event 249

Liquidity Event Equity Venture Capital Merger 249

Steve Blank

JUNE 11, 2013

The test is: If you add one more sales person or spend more marketing dollars, does your sales revenue go up by more than your expenses? What are revenue strategy and pricing tactics? In a perfect world, you would never need investors and would fund the company from customer revenue. What problems do they want solved?

Venture Capital 335

Venture Capital IRR Liquidity Event Business Model 335

Startup Professionals Musings

JULY 27, 2018

Potential investors love to see gross margins in the fifty percent range or greater, with recurring revenue through subscriptions, follow-on sales, or services. Five-year financial projections of revenue and expenses. Discussion of likely liquidity events and exit strategy.

Product 145

Product Intellectual Property Liquidity Event Valuation 145

Berkonomics

JANUARY 5, 2023

If we follow the reasoning of our CEO who proposed the rule, we can drop an additional 30% of the net revenues (after cost of sales) from the acquired company to the bottom line. Facilities may become redundant or oversized after these efforts, allowing for consolidation of facilities as well. Not a bad goal, and certainly not a bad result.

Acquisition 62

Acquisition .Net Retention Sales 62

Startup Professionals Musings

MAY 28, 2013

Aggressive revenue projections and growth rate. Revenue in the fifth year should be at least $20 million, with a growth rate average of 100% per year. In other words, revenue projections are not the place to be too conservative or wildly optimistic. Gross margins greater than 50%. Show red ink to match your funding request.

Liquidity Event 243

Liquidity Event Startup Equity Venture Capital 243

Up and Running

SEPTEMBER 19, 2017

That is to say, they’d want to be able to control costs and revenues at a high level. Private equity investments are an important part of many startup business’s plans for accelerating growth or providing founders with a liquidity event. Conclusion.

Private Equity 94

Private Equity Pre-Money Valuation Equity Startup 94

Startup Professionals Musings

SEPTEMBER 7, 2015

I recently saw a startup projecting $50 million in revenue for the first year. I recommend five-year projections, to show the evolution of revenues and expenses and funding and profitability expectations over time. My rule of thumb is that startup-revenue projections in the fifth year better be between $20 million and $100 million.

Liquidity Event 120

Liquidity Event Startup Initial Public Offering Equity 120

Berkonomics

MARCH 21, 2019

If you are a going business with a track record of revenues, then the importance of accurate current financial statements cannot be overstated. If there is no record of revenues, see the “The Berkus Method” available with any search query for valuing the business before revenues. Let’s start with the basics.

Hockey Stick 63

Hockey Stick Liquidity Event Valuation Balance Sheet 63

Startup Professionals Musings

AUGUST 13, 2012

Clearly define the customer, channel, and revenue model associated with this solution. In this section, you need to be passionate about revenue, profit, and volume growth. Many people seem to use the social network advertising model for revenue, but forget it assumes at least 100M users and $50M investment. Exit strategy.

Business Plan 283

Business Plan Sweat Equity Exit Strategy Intellectual Property 283

Steve Blank

JUNE 11, 2013

The test is: If you add one more sales person or spend more marketing dollars, does your sales revenue go up by more than your expenses? What are revenue strategy and pricing tactics? In a perfect world, you would never need investors and would fund the company from customer revenue. What problems do they want solved?

Venture Capital 227

Venture Capital IRR Liquidity Event Business Model 227

Gust

AUGUST 10, 2014

Aggressive revenue projections and growth rate. Revenue in the fifth year should be at least $20 million, with a growth rate average of 100% per year. In other words, revenue projections are not the place to be too conservative or wildly optimistic. Gross margins greater than 50%. Show red ink to match your funding request.

Liquidity Event 176

Liquidity Event Equity Venture Capital Merger 176

Steve Blank

JULY 15, 2010

Until 1995 startups going public typically had a track record of revenue and profits. Suddenly there was a public market for companies with limited revenue and no profit. Number of Venture Backed Liquidity Events 1991-2000. Number of Venture Backed Liquidity Events 2000-2010. Source: NVCA.).

Venture Capital 306

Venture Capital IPO Liquidity Event Entrepreneur 306

Steve Blank

JUNE 23, 2016

Intel under their last two CEOs delivered more revenue and profit than any ever before. Capital is returned to these investors through liquidity events (originally public offerings, but today mostly acquisitions). Second, the leaders of these companies tended to be those who excelled at finance, supply chain or production.

Architecture 227

Architecture IRR Balance Sheet Liquidity Event 227

Startup Professionals Musings

MAY 13, 2011

Clearly define the customer, channel, and revenue model associated with this solution. In this section, you need to be passionate about revenue, profit, and volume growth. Many people seem to use the social network advertising model for revenue, but forget it assumes at least 100M users and $50M investment. Exit strategy.

Business Plan 290

Business Plan Sweat Equity Exit Strategy Intellectual Property 290

Startup Professionals Musings

AUGUST 7, 2015

Every customer understands that your solution has to generate more revenue than cost, but you should not put that data in a customer pitch. Projected revenues and expenses over the strategic period. The entrepreneur needs to show a strategy for such an event, and a projected value and return to the investor.

Product 120

Product Intellectual Property Liquidity Event Burn Rate 120

Steve Blank

JULY 19, 2010

Where’s My Liquidity Event. Some VC’s feel that if a startup has grown past the founder’s ability to manage and scale (and hasn’t had a liquidity event,) they should be able to remove the founding CEO and (at best) walk them out the door with only the stock they vested to that day. I’ll posit that both views are wrong.

Vesting 264

Vesting Liquidity Event Founder Vesting Venture Capital 264

Berkonomics

AUGUST 3, 2023

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). For those of you who fit that description, nice work. Often private equity investors will want control of the business as well.

Private Equity 118

Private Equity Valuation Cap Table Accredited Investor 118

Berkonomics

SEPTEMBER 13, 2018

In one of many meetings with the buyer’s CEO, I “accidentally” dropped the truthful fact that his hardware now accounted for only about a third of our hardware revenues, down from 100% several years earlier. Negotiating with an emotional buyer.

Intellectual Property 240

Intellectual Property Investment Bankers Acquisition Forecast 240

Both Sides of the Table

MARCH 3, 2013

VC can’t don’t invest in these kinds of companies because they can’t get out (no liquidity event). ” No royalty paid until there is revenue. New company in Boston with a model called “royalty capital.” ” Money is not debt or equity but a “license to use their capital.”

Bankruptcy 403

Bankruptcy Offshore Liquidation Preference Balance Sheet 403

Berkonomics

AUGUST 20, 2015

The inciting incident in a movie is the event at the beginning of the story that causes the hero’s life to be completely transformed and irrevocably changed, and makes the whole story unfold. I thought of this in a recent liquidity event in one of my portfolio companies. But, they were clearly mouthwatering.

Liquidity Event 48

Liquidity Event Private Equity Valuation Equity 48

Startup Professionals Musings

FEBRUARY 13, 2016

What are your forecasts for revenue, expenses and cash flow? If you don’t plan a liquidity event, you won’t find many investors interested. Since investors are buying a part of your company (not your product), this is the most important question, and is one often not answered.

Sweat Equity 120

Sweat Equity Advisory Board Liquidity Event Startup 120

Steve Blank

MARCH 18, 2011

VC’s worked with entrepreneurs to build profitable and scalable businesses, with increasing revenue and consistent profitability – quarter after quarter. The reward for doing so was a liquidity event via an Initial Public Offering. For VC’s and entrepreneurs the gold rush to liquidity was on. The New Exits.

Internet 335

Internet IPO Silicon Valley Agile 335

Gust

AUGUST 5, 2012

Clearly define the customer, channel, and revenue model associated with this solution. In this section, you need to be passionate about revenue, profit, and volume growth. Many people seem to use the social network advertising model for revenue, but forget it assumes at least 100M users and $50M investment. Exit strategy.

Business Plan 182

Business Plan Sweat Equity Exit Strategy Intellectual Property 182

Berkonomics

SEPTEMBER 24, 2015

Perhaps you have decided to continue growing top line revenues at the expense of cash flow (EBITDA.) For high growth ventures being groomed for a lucrative liquidity event, this is usually a wise choice, presuming additional growth capital can be successfully raised on agreeable terms.

Liquidity Event 48

Liquidity Event Ohio Acquisition Revenue 48

Berkonomics

SEPTEMBER 26, 2013

For starters, as the due diligence and documentation period drags on, you’ll have to keep your company’s eyes off the ball to continue the increasing revenues and profit momentum. The liquidity event and beyond' What could happen to kill the deal that looks so good to all now?

Due Diligence 85

Due Diligence Liquidity Event Intellectual Property SEC 85

Berkonomics

DECEMBER 19, 2013

Revenue projections: What will happen to the company if the revenues and earnings projected on a worst case basis are not achieved as predicted? In a liquidation, would you have profited at the expense of your investors by taking high salary or draws before breakeven? Order all 3 Berkonomics books for $49.95,a a 33% discount.

Pre-Money Valuation 105

Pre-Money Valuation Liquidity Event Cofounder Valuation 105

Startup Professionals Musings

APRIL 22, 2010

Clearly define the customer, channel, and revenue model associated with this solution. In this section, you need to be passionate about revenue, profit, and volume growth. Many people seem to use the social network advertising model for revenue, but forget it requires at least 100M users and $50M investment. Exit strategy.

Business Plan 186

Business Plan Exit Strategy Sweat Equity Intellectual Property 186

Steve Blank

JULY 2, 2009

You can be an Independent studio or do “work for hire&# (either a revenue share or buy-out model) - If you’re an independent studio you have a set of choices for distribution channel and marketing models. - We understood none of this. More detail in future posts. But I wonder if the success is due to or in spite of VCs.

Silicon Valley 120

Silicon Valley Technical Review RSS Software Review 120

YoungUpstarts

MARCH 11, 2015

A company can have value, even if there is no current income or revenue. The following are examples of why these types of valuations can be tricky and may require outside expertise. This can result in value even if the company has not sold one product!

Valuation 100

Valuation Stock Options CPA Merger 100

Up and Running

SEPTEMBER 20, 2021

A convertible note is like a loan, but this amount can be converted into company equity later on, usually during a liquidation event, like the acquisition of the company. It is attractive for seed-stage companies that have not had time to show much traction in terms of their product or revenue. Convertible notes.

Cap Table 112

Cap Table Pre-Money Valuation Stock Options Option Pool 112

Berkonomics

DECEMBER 17, 2020

VCs often invest no less than $2 million in a single deal, finding it difficult to put less money to work and still spend time on boards and coaching entrepreneurs to a successful liquidity event. For early stage investors, the usual expectation is seven years from investment to expected liquidity. And the one thing in common?

Equity 62

Equity Finance Liquidity Event Angel Groups 62

Berkonomics

JUNE 8, 2017

Some businesses require very little capital and the founder can self-finance the enterprise and retain 100% of its ownership and control from ignition through liquidity event (startup through sale). For you who fit that description, nice work. Often private equity investors will want control of the business as well.

Private Equity 106

Private Equity Valuation Cap Table Accredited Investor 106

Growthink Blog

MAY 26, 2011

Last week, TruckCenter.com was purchased by Liquidity Services (NASDAQ: LQDT), a company that runs online auctions for surplus goods. I found this pretty amusing since when a company is purchased, we often say it reached a "liquidity event." your business) into cash.

Acquisition 81

Acquisition Liquidity Event Valuation Revenue 81

Gust

NOVEMBER 4, 2011

Although Intermix was doing well during that period, bringing in around $75 million annual revenue, all of the explosive traffic growth was occurring at one property, MySpace – the jewel for which FIM ended up acquiring the whole Intermix crown. of MySpace, Inc.

Valuation 98

Valuation Pre-Money Valuation Merger Vesting 98

Both Sides of the Table

SEPTEMBER 27, 2010

If the company is moderately successful, growing and has great prospects for the future than a small liquidity event will help founders & venture capitalists to be aligned. The hardest thing is deciding what the right time to allow founder liquidity is. It is such a disconnect. We saw this with VC backed companies in 07/08.

Silicon Valley 308

Silicon Valley Liquidity Event Seed Stage Finance 308