Category: valuation
February 13, 2020 Vanity Fair : “No Longer Tethered to the Fundamentals”: A Nassim Taleb Protege On How To Prepare For The Coming Market Crash
What do you do when the bond market is basically uninvestable and the stock market keeps hitting all-time highs and you know in your gut that none of this will end well? What do investors—big and small—do in such unfortunate circumstances, like the ones we collectively find ourselves in now? (read more…)
February 13, 2020 Tech Crunch : Portfolio bloat: What’s happening to thousands of startups going nowhere fast
Ravi Viswanathan of the venture firm NewView Capital sums up what’s happening out there this way: “Firms and funds are generally coming back to market faster with bigger funds, and they’e investing a lot more, so you’re seeing portfolio bloat across the industry. But [limited partners, the outfits and people supplying money to venture funds] are investing for you to make money, and that means spending time on the needle movers.” (read more…)
CATEGORY: capital, customer acquisition, valuation, VC
February 7, 2020 Alex Danco : Debt is Coming
The Financial Capital all-equity stack, as powerful as it is for creating something out of nothing, is and has always been at odds with the Production Capital mentality of a business builder and operator. There is nothing inherent to tech companies that requires that so many of them fail to live up to their aspirational valuations, aside from the way they’re funded. (read more…)
CATEGORY: alternative financing, debt, risk, valuation
January 9, 2020 Wall Street Journal : Money-Losing Companies Mushroom Even as Stocks Hit New Highs
The combination of forces has pushed the percentage of listed companies in the U.S. losing money over 12 months to close to 40%, its highest level since the late 1990s outside of postrecession periods. This time there’s no recession, and stock market indexes are at or near record highs. That sounds scary, although it’s mainly worrying for investors in smaller companies. (read more…)
CATEGORY: downturn, profitability, risk, valuation
June 11, 2019 SaaS Capital : Private SaaS Company Valuations: 2019
To determine what your private SaaS company is worth: Find the current revenue multiple of public SaaS companies growing at a similar rate; Subtract 2 to get the discounted private SaaS company multiple; Multiply your company’s trailing twelve month revenue by the discounted private SaaS company multiple. Is that overly simplistic? Of course. What about Total Addressable Market (TAM), retention, gross margins, and “synergies,” you ask? All are important, and all those inputs help explain why all the dots in the chart are not on the straight lines. The world is full of variability and nuance. However, if you step back and look, the formula will certainly give you “most of the answer” and provide a good place to start an informed valuation discussion. (read more…)
January 23, 2019 Recode : “Venture capital money kills more businesses than it helps,” says Basecamp CEO Jason Fried
Fried told Recode’s Kara Swisher that venture capital “kills more businesses than it helps” because the pressure to grow crazy-fast means companies keep raising money to keep their growth rate up. That, in turn, means they rarely have the opportunity to learn how to spend money in a disciplined, sustainable way. (read more…)
CATEGORY: growth, valuation, winner take all
January 11, 2019 New York Times : More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost
The event had been organized by Frank Denbow, 33, a fixture of New York’s tech scene and the founder of T-shirt start-up Inka.io, to bring together start-up founders who have begun to question the investment framework that has supercharged their field. By encouraging companies to expand too quickly, Mr. Denbow said, venture capital can make them “accelerate straight into the ground.” (read more…)
CATEGORY: growth, risk, valuation, VC
October 10, 2018 CNBC~ : Start-up economy is a ‘Ponzi scheme,’ says Chamath Palihapitiya
Chamath Palihapitiya, the outspoken Silicon Valley tech investor, called the start-up economy a charade on Wednesday, while also addressing the current the state of Social Capital, his embattled investment firm. "We are, make no mistake … in the middle of an enormous multivariate kind of Ponzi scheme," said Palihapitiya, at the Launch Scale conference in San Francisco. (read more…)
CATEGORY: risk, valuation, VC, winner take all
August 22, 2018 The Quantified VC : How to Win in Venture Capital: Focus on the Fat Tails
Since the track record of VCs is overwhelmingly skewed by a tiny handful of “unicorns,” entrepreneurs who try to assess the reputation of VCs by only looking at home-runs may get a skewed view. In good times, investors will be supportive. But how will they behave during bad times? Even great companies go through ups and downs. If your startup is not one of the big winners (which is likely, based on probabilities), how will your VCs behave? Will they abandon ship?—?or worse, will they turn negative or downright hostile? (read more…)
CATEGORY: risk, valuation, VC, winner take all
June 13, 2018 Red Wilson : The Valuation Obsession
There is an obsession with the values that are being placed on companies when they finance. There has always been one but it is worse than ever. Every day, without fail, I read a headline that so and so company has raised, will raise, or is trying to raise capital at some eye popping valuation. (read more…)
CATEGORY: capital, valuation, VC