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If you have a very low gross margin (10-30%) it can be very hard to build a large, scalable business because you need to make a lot of sales to cover your operating costs. In startup world low GM almost always equals death which is why many Internet retailers have failed or are failing (many operated at 35% gross margins).
. “Yes&# was given to me by one of my favorite angel investor / seed VC’s to work with – John Greathouse of Rincon Venture Partners and author of the blog InfoChachkie that you should check out because it is filled with great info from a guy who has been a very successful operator.
Effective) post-moneyvaluation. Similarly, the capital-efficiency to date is taken as reflective of inherent in the business itself and operating mindset of the team, rather than as the amount of capital used for discovery of product-market fit that is decoupled from the efficiency post-traction.
As well as how to work with pre and post-moneyvaluations. You’re going to be asking your investors for a lot of generosity in their patience, more money, introductions, and all types of daily operational help. This instantly puts founders on guard, in a defensive position. Generosity is nowhere on their radar.
2010 Operating Income: $16 million. Post-moneyvaluation probably no higher than $12M (2). Gross Margin: 94% –> i.e. for every $1 of revenue Kayak only spends $0.06 paying for travel data from ITA or others (customers acquisition spend is not included in COGS). 2010 Net Income: $8 million. Series A-1 Preferred.
At Fab, our virtual product is our website & apps, our physical products are the merchandise we sell, and our experience product is our operations and service. Do they operate in silos or do they foster teamwork and collaboration? 10M post-moneyvaluation = $100M target. 500M valuation = $5B target.
People who think of fund raising as a “distraction away from the core business” fundamentally don’t understand that running a business comprises of: Shipping products, selling to & servicing customers, marketing, HR, recruiting, financial reporting AND making sure you have enough money to support operations.
Taking Corporate Venture Money: When it Makes Sense “PayPal took on these investors in small part because it gave us an imprimatur in the stodgy and regulated world of financial services. ” (Lee Hower). 7 Common Mistakes Entrepreneurs Make in VC Pitches and How to Fix Them “Different partners in a VC firm are different.
This person is an experienced CEO and a veteran of several startups, yet appreciating this nuance of how VC’s operate their business was relatively unfamiliar to him. Well at this juncture Startup X’s valuation is presumably a lot higher than it was at the Series A, maybe even 5-10x+ higher.
Year in, year out, Thus, VCs and entrepreneurs are not operating on an equal playing field when it comes to negotiating financings and interpreting the impact of the terms involved. The “promote”, as we have called it, is the founding team’s ownership percentage multiplied by the post-moneyvaluation.
The X and Y are negotiated, with the Y typically being a date shortly before the convertible debt is all used up by the company in its operations. One interesting point that comes up a lot is how to factor the convertible debt into the premoney valuation of the Series A round.
As an entrepreneur, one could always make the argument that it’s best to keep operating longer and show more progress before raising to get the best valuation possible. There are broadly three buckets of series A’s, and therefore, three valuation buckets.
postmoneyvaluation. Mark Cuban offered $300k for 33% of the company, implying a $900k postmoneyvaluation. implying a $600k postmoneyvaluation. The company ended up negotiating with Cuban and settled on $300k for 30% of the company, or a $1M postmoneyvaluation.
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