61–70 of 205 posts
Earlier quoted context omitted.
I imagine YC's share will have been diluted quite a bit, but no doubt it's a great ROI.
It would be intelligent if YC take a non-diluted portion. That is if the startup raise VC money, the YC % don't get diluted and the founders % get diluted a little more.
heroku 94% pg 6% (early 2008) --- $3M Series A (mid 2008) Assuming a $2M pre-money: heroku 37.6% pg 2.4% series A 60% --- $10M Series B (2010) Assuming a $5M pre-money: heroku 12.5% pg 0.8% series A 20% series B 66.6% --- $212M Exit: heroku $26.5M pg $1.7M series A $42.4 series B $141.3 --- result: series A $3M -> $42.4M // 14X in 2.5 years series B $10M -> $141M // 14X in 1 year pg $17K -> $1.7M // 100X in 3 years A…
Is that really how much VC dilutes you? From 94 > 37% series A is incredible, and ending up with 12.5%. I wouldn't exactly be crying into my beer today if I was them, but I have to wonder if VC was worth it vs building organically for a few more years. Especially when they are all Amazon based etc. Where did the money go?
Generally a venture round will be for between 33% and 20% of the company, trending lower as the company gets further along. 25% is a pretty typical number.
If you assume each of Heroku's two rounds were for 25% of the company, then 94% -> 70.5% after the A -> 52.9% after the B. (It seems counterintuitive to sell 25% of the company twice but end up with more than 50% of it, but this is because the Series B dilutes the Series A as well as the common.) The premoney valuations implied for the A & the B would be $9MM and $30MM respectively.
The reality would be lower, because this doesn't take into consideration things like option plans. If we assume they created a 10% option pool before the A and then used it all, the dilution looks more like this:
94% -> 84.6% (options) -> 63.4% (A) -> 47.5% (B)
Of course these things can still vary pretty widely. But no one's doing $10MM on $5MM premoney unless something has gone pretty wrong. In that case I'd expect the management team to get topped up with additional options to keep them motivated.
As an aside, the calculation of who made what also assumes that the investors have no pro-rata rights, which is wrong. When a company raises $10MM in a Series B, not all $10MM comes from the Series B investor.
heroku 94% pg 6% (early 2008) --- $3M Series A (mid 2008) Assuming a $2M pre-money: heroku 37.6% pg 2.4% series A 60% --- $10M Series B (2010) Assuming a $5M pre-money: heroku 12.5% pg 0.8% series A 20% series B 66.6% --- $212M Exit: heroku $26.5M pg $1.7M series A $42.4 series B $141.3 --- result: series A $3M -> $42.4M // 14X in 2.5 years series B $10M -> $141M // 14X in 1 year pg $17K -> $1.7M // 100X in 3 years A…
> $3M Series A (mid 2008) Assuming a $2M pre-money > $10M Series B (2010) Assuming a $5M pre-money I know this was just a thought exercise, but shouldn't their valuation have increased between 2008 and 2010?
This should put a hop in the step of all those Heroku-for-Django startups.
I thought that was Google App Engine?
Earlier quoted context omitted.
I imagine YC's share will have been diluted quite a bit, but no doubt it's a great ROI.
It would be intelligent if YC take a non-diluted portion. That is if the startup raise VC money, the YC % don't get diluted and the founders % get diluted a little more.
I can see EngineYard opening a bottle to celebrate as well, $212M in 'mostly stock' would be landing a big one, to be landing it in cash is very good indeed. Congratulations to everybody, especially to the people that brokered the deal on Herokus side, very impressive. In other news, registrars the world over report a large uptick in domain registrations around the twin themes of rails hosting and sushi...
This is great news for Heroku and YC (congratulations folks!). That said, does anyone have any insights on why exactly SalesForce would buy Heroku? What is the business rationale? "This is Salesforce’s fifth acquisition this year. Earlier purchases include Activa Live, Sitemasher and Jigsaw. Salesforce.com also spent $170 million to fully acquire its Japanese subsidiary, Salesforce Japan." Anyone see a pattern? I don…
Earlier quoted context omitted.
Activia Live and Jigsaw relate to Salesforce's core CRM business, Sitemasher and Heroku are both cloud hosting platforms. Salesforce has been pushing heavily into the cloud to compete with AWS and Azure (see their recent Database.com announcement), these acquisitions give them a strong position in the market. Heroku in the past has said they plan to offer multiple cloud backends, so it wouldn't surprise me if that's…
"Salesforce has been pushing heavily into the cloud to compete with AWS and Azure" Just five years too late. They should have built AWS way before anybody else (esp Amazon) did. They were sitting on the opportunity for so long, had a customer base that was already sold on the cloud. They are now playing catch-up, with acquisitions and the release of Database.com etc. Huge opportunity missed, the company could have be…
Salesforce five years wasn't anywhere near enough in the position that they could afford to throw tens of millions of dollars into a non-core product (which Amazon could easily do).
It easy to point out opportunities missed without looking at the cost of those opportunities.