I got a late-stage secondary opportunity today, shopped around by a bank. A major bank. They attached a list of comps and calculated the "risk": Enterprise Value to Revenue to Revenue growth (aka "EVRG"). It's almost worse than a Price-to-Earnings-to-Growth (aka "PEG") ratio. I think the idea here was that there is a high EV-to-Revenue … Continue reading Bullshit Metrics: PEG and EV/R/G
We often get the question about "Leading Unicorn Venture Capital Firms". And emerging fund managers are sometimes taken aback when we are unfazed about their two unicorns in their portfolio and continue our due diligence. Business Insider just published an article about early-stage investors with billion-dollar outcomes. [DISCLAIMER BELOW] [EDIT 5/28/2019, 08:38 PDT -- I … Continue reading Leading Unicorn VC Firms and The Long Tail
SEG: 1Q19 SaaS M&A Update, via http://softwareequity.com/research/ SaaS multiples of venture-backed SaaS Startups are driven down by volume and choice. Tom Tunguz has written a lot about SaaS multiples, specifically about Where are SaaS Companies Priced After the 2018 Correction. We are getting a lot of inquiries from VCs, entrepreneurs, and LPs alike about pricing. … Continue reading Volume and Choice drive down Startup SaaS M&A Multiples.
I was using Preqin to understand office locations of firms (institutional, family offices, and corporates) that are doing direct venture capital investments and are still seeking actively for new investments (collectively called "VC firms" below). Tobias Lam from the Preqin NYC office was kind enough to pull some back-end data on office locations for firms … Continue reading VC Funds: $100 billion of dry powder in the Bay Area.
I get this question a lot: How long does it take to close a VC fund? We all know the anecdotes of marquee firms closing their funds within weeks. But don't forget that it often took 20 years to become a marquee firm and to build a robust platform and track record. So they closed … Continue reading VC Funds: A Median of 17 Months in Market to Final Close.
Benchmarks are great to tell you where you are compared to others. In venture capital, there are three common problems with benchmarks: History, math, and ego. 1. Benchmarks are History Benchmarks are backward looking. Past performance is no guarantee of future results. Maybe market mechanics changed. Maybe the supply and demand of startup funding in … Continue reading The Pitfalls of Benchmarks.
After the last blog post (Startups: Don't compete on "nimble" and "cash burn.") I got a lot of questions on how to look at these public companies with negative EBITDA or negative Net Income. Here are some ideas. Dataset 1: Public Companies with Negative EBITDA Some companies have a negative EBITDA, but massive revenue growth, … Continue reading Datasets for Public Companies with Negative EBITDA or Net Income
Fifteen years ago I was sitting on a panel with senior executives of large enterprises. We were discussing how startups, with their limited resources, are competing against established, well-funded public enterprises. A Corporate R&D executive of a public company quipped: Publicly traded companies usually can't afford to lose money. Internet companies and startups can, at … Continue reading Startups: Don’t compete on “nimble” and “cash burn”.