Nuts? Bubblicious? A (very) simple explanation of super high startup acquisition prices. More often than not the reaction to a large company buying a comparatively small startup for a few hundred million or even a few billion is “nuts”, “bubblicious”, etc.
In some cases this may be true and history sure is littered with poor acquisitions. It is also full of great acquisitions that were called crazy at the time. The problem is that we (e.g. wider public, journalists, the tech community and anyone not part of the deal) are largely working of a fraction of the information required to determine the “true value” of the startup company (let’s call it StartCo) to its acquirer (let’s call it LargeCo). The two key pieces missing to outsiders are usually the financial projections of StartCo for the next years and the synergies (both cost savings and additional revenues) LargeCo thinks it can achieve by acquiring StartCo. Finance for Geeks. Ï»¿ Summary: Eric Sink provides a geek-oriented overview of accounting and company funding.
On my weblog I write a series of articles entitled Marketing for Geeks. The concept of these articles is that a lot of technically-oriented people actually do end up involved in marketing decisions. Most software startups are founded by one or more geeks, often without the presence of experienced people in other areas like marketing. For these people, a little marketing knowledge can go a long way. The series has been quite popular, but marketing is obviously not the only functional area that a geek entrepreneur might need to learn. Corporate Development 101: What Every Startup Should Know. The following is a guest post by Chris Sheehan.
Chris is COO of TrueLens, an early stage startup in the social marketing space. He is also a board member, advisor and investor in many Boston and NYC startups. You can follow him on Twitter at @c_sheehan and his blog Early Stage Adventures. How to grow your app revenue with DuPont analysis (Guest post) About the author: Kenton wrote this fantastic piece about analyzing in-app revenue, drawing from his work experience at both Zynga, where he runs their mobile poker product, and before that, Google.
You can follow him at @kivestu and his blog here. -Andrew.
Market sizing. Determining Valuation Multiples. Last week on MBA Mondays, I talked about valuing an internet marketplace business.
Want to Know How VC’s Calculate Valuation Differently from Founders? Back in 1999 when I first raised venture capital I had zero knowledge of what a fair term sheet looked like or how to value my company.
Due to competitive markets we ended up with a pretty good term sheet until we needed to raise money in April 2001 and then we got completely screwed. It was accept the terms or go into bankruptcy so we took the money. This Week in Venture Capital #15 with Kelly Hwang, Associate at GRP. Misadventures in VC Funding: The $24 Million Moz Almost Raised. 3 Quick and Dirty Business Hacks. My mother was a high school mathematics teacher and understood that kids learn best when learning is fun, so at a very young age she started teaching me math “tricks.”
In the second grade she showed me how 9 times any number less than 10 was simply that number minus 1 concatenated with the sum of difference plus whatever it takes to get back to 9. For example, 9 x 8 is 8 minus 1 (7) concatenated with 9 minus 7 (2) — 72. Principles of Corporate Finance: Amazon.fr: Richard A. Brealey, Stewart C. Myers, Franklin Allen: Livres anglais et étrangers. All Revenue is Not Created Equal: The Keys to the 10X Revenue Club.
May 24, 2011: May 24, 2011: [Follow Me on Twitter]
Go Beyond the Definition. Welcome to Monte Carlo, Excel - Continuations. Welcome to Monte Carlo, Excel Following up to yesterday’s post about randomness, Excel provides a very easy tool for modeling probability.
Valuation Witchcraft - Where Do Seed Valuations Come From? - robgo.org. Valuation Witchcraft – Where Do Seed Valuations Come From?
September 29, 2010 Given all the talk recently about rising seed valuations and AngelGate, I wanted to do a sequel to my old post on how VC’s Value Early Stage Companies. The valuation dynamics are even more puzzling at the seed stage, where there is even less to value. Pascal Quiry - Analyse Financière. The Option Pool Shuffle. “Follow the money card!” – The Inside Man, Three-Card Shuffle Summary: Don’t let your investors determine the size of the option pool for you. Use a hiring plan to justify a small option pool, increase your share price, and increase your effective valuation. Thoughts: Term Sheet.
While some people hate the phrase “failing fast”, I find it instructive when it’s used to signify that one isn’t going to pursue a particular path in the context of a larger set of activities. A few weeks ago, I wrote a post about The Proliferation of Standardized Seed Financing Documents. It generated several hundred email responses and a handful of phone calls. A week or so later, my partner Jason Mendelson wrote a post titled Why There Will Never be a Standard Set of Seed Documents. I’ve concluded that Jason is right so rather than torture myself, I’m failing fast with regard to trying to help create a set of standardized seed documents. Return Free Risk - A Merger Arb Anecdote. Guillaume Martin: Eureka, le pacte d'actionn...
Holy Crap! HubSpot Has Now Raised A Total Of $33 Million. It has been a little over a year since I announced the news that my marketing software startup closed it’s Series B round of funding. The article, “Insanity? Why A Bootstrap Entrepreneur Raised $17 Million in Venture Funding”, was a candid glimpse into the rationale for raising what seemed like a huge amount of money to me at the time (it seemed huge, because it was — at least to me).
Today, we’ve released news that HubSpot has just closed on another $16 million funding round (our Series C) bringing our total capital raised to a whopping $33 million. Series AA Equity Financing Documents. Safe Financing Documents The safe (simple agreement for future equity) is intended to replace convertible notes in most cases, and we think it addresses many of the problems with convertible notes while preserving their flexibility. In addition to being simpler and clearer, we intend the safe to remain fair to both investors and founders.During its development the safe was positively reviewed by many of the top startup investors. We believe it’s a positive evolution of the convertible note and hope the startup community finds it an easier way to accomplish the same goals.
Features of a safe: Want to Know How VC’s Calculate Valuation Differently from Founders? Startup Killer: the Cost of Customer Acquisition. Valuation and Option Pool. One of the more contentious things in the negotiation between an entrepreneur and a VC over a financing, particularly an early stage financing, is the inclusion of an option pool in the pre-money valuation. As my friend Mark Pincus likes to say, "it's just another way to lower the price". I'll accept that critique. And take it one step further. The option pool is absolutely a piece of the price negotiation. But it is a very important one as I'll explain. But first, let me lay out a few things for those who aren't well versed in these matters.
But to the entrepreneur it might be a lot more dilutive due to the inclusion of the option pool in the pre-money valuation. Don't Let the Funky Math of Convertibles Bite You - Continuation. Options on early stage companies cdixon.org – chris dixon's blog. I believe that what I’m about to say is accepted by venture capitalists as fact, even trivially obvious fact, yet very few entrepreneurs I meet seem to understand it.
Beware the Hockey Stick in Your Budget. We are deep in budget season as the last board meeting of the year typically includes the 2010 Budget – or at least the “2010 Draft Budget” or “2010 Budget – Draft”. Guillaume Martin: Ce que tout entrepreneur d... [0904.0016] Stochastic Models of User-Contributory Web Sites. Burn Rate as the Canonical Mistake (for Web Startups) - Continua. Stats. When it Makes Sense to INCREASE the Burn Rate « VCMike's Blog. Analyzing Financial Statements. CHART OF THE DAY: How Google Invests Its Cash. Opportunity Costs. Off Balance Sheet Liabilities. In the past couple weeks we’ve talked about some costs that don’t always appear on the income statement; opportunity costs and sunk costs.
Today, I’d like to talk about some liabilities that don’t appear on the balance sheet.