Category: valuation
May 16, 2018 Kevin Roose, New York Times : The Entire Economy Is MoviePass Now. Enjoy It While You Can
The new way to make it in business is to spend big, grow fast and use Kilimanjaro-size piles of investor cash to subsidize your losses, with a plan to become profitable somewhere down the road. (read more…)
CATEGORY: customer acquisition, growth, valuation, VC
April 16, 2018 Seth Levine : What’s the Optimal Portfolio Strategy for a Venture Fund?
Last year I wrote a few posts (here and here) that talked about how skewed venture returns were. The key take-away graphic from that post is below – outsized returns on venture investments are rare. Much rarer than most people realize. (read more…)
CATEGORY: risk, valuation, VC, winner take all
March 5, 2018 Eric Paley via Tech Crunch : When venture capital becomes vanity capital
I’ve written a lot about the benefits of efficient entrepreneurship. I’ve explained my view conceptually, tried to illustrate the mechanics of how excess capital kills promising companies, and shared data from 71 IPOs that demonstrates that even in success, more capital raised is not correlated with better outcomes. Just in case all of that was too conceptual, this blog post is designed to appeal to another emotion—greed. Raising less money or money later doesn’t just lead to better companies, it leads to richer founders. (read more…)
CATEGORY: leadership, valuation, VC
November 28, 2017 Pitchbook : Why unicorns are overvalued (and the industry knows it)
The rise of private market unicorns is well known—rising from 40 in the US when the term was coined four years ago to more than 120 now. The cumulative unrealized value of current US unicorns is approaching $600 billion, per PitchBook data. Exit times are lengthening, giving rise to a dynamic I've dubbed the "zombiecorn" as VC-backed companies stay private for far longer than has been seen historically. But what if it's all built on a lie? (read more…)
CATEGORY: risk, valuation, VC
October 20, 2017 Pitchbook : 2017 PE & VC Fund Performance Report
2016 marked the fifth consecutive year of positive net cashflows for both private equity and venture capital; however, net cashflows decreased significantly from 2015 to 2016. With investment activity remaining robust in 2017 while the pace of exits continues to decelerate, we expect the downward trend in net cashflows to persist. (read more…)
CATEGORY: valuation, VC
October 12, 2017 Jon Westenberg via Medium : No, Trello Didn’t “Fail To Build A Billion Dollar Business
I have no real interest in billion dollar companies. I’m interested in companies that serve their customers, build amazing products and make money. If they happen to reach a billion, that’s great. But getting to a billion is not a goal that keeps me up at night. (read more…)
CATEGORY: growth, leadership, valuation
October 12, 2017 CRV via Medium : SaaS Waterfall Metrics 3–2–1
The calculations and definitions of SaaS businesses are fairly standardized, but the format of the data exchanged and reported on is all over the map. Having spent five years in the VC industry and seeing pretty much every variation of an up and to the right ARR chart out there (and down and to the right), I’ve decided to post my preferred format. Ideally this will prove helpful for startups and investors often juggling terminology and answering the question: “How did you do in Q1? (read more…)
August 10, 2017 Fenwick & West : Silicon Valley Venture Capital Survey – Second Quarter 2017
This report analyzes the valuations and terms of venture financings for 208 companies headquartered in the Silicon Valley that raised capital in the second quarter of 2017. Following a decline in 2016, venture valuations continued the improvement that began in Q1 2017. Valuation metrics are now marginally higher than their 13-year averages. (read more…)
CATEGORY: valuation, VC
May 16, 2017 Tech Crunch : There’s no shame in a $100M startup
Ideas that look like billion-dollar businesses at the seed stage can run into unexpected barriers. For modestly funded startups, these mistakes don’t need to be fatal. Unfortunately, most VCs are sized such that they can only succeed if they have several companies in their portfolio exit for more than a billion dollars. So VCs overfund startups with decent but uninspired progress, which cuts off realistic and enriching exit opportunities. (read more…)
CATEGORY: product-market fit, valuation, VC
April 22, 2017 Will Gornall and Ilya Strebulaev : Squaring Venture Capital Valuations with Reality
We develop a valuation model for venture capital-backed companies and apply it to 135 U.S. unicorns -- private companies with reported valuations above $1 billion. We value unicorns using financial terms from legal filings and find reported unicorn post-money valuation average 50% above fair value, with 15 being more than 100% above. Reported valuations assume all shares are as valuable as the most recently issued preferred shares. We calculate values for each share class, which yields lower valuations because most unicorns gave recent investors major protections such as a IPO return guarantees (14%), vetoes over down-IPOs (24%), or seniority to all other investors (32%). Common shares lack all such protections and are 58% overvalued. After adjusting for these valuation-inflating terms, almost one-half (65 out of 135) of unicorns lose their unicorn status. (read more…)
CATEGORY: valuation, VC