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I find it interesting that he is interested in enterprise ROI types of technologies. Something I think is undervalued here at Hacker News.
Earlier quoted context omitted.
Enterprise (or paid small-business services) always comes back in style in recessions. Look at 2002: the two big IPOs were PayPal and LoudCloud/Opsware. It's because ad spending - and particularly, ad spending in unproven mediums - tends to fall dramatically when money is tight. It's the first thing to go, well before productivity enhancements. Of course, this means that for entrepreneurs starting companies now , con…
> Sucks for people (like me) who started consumer web startups in 2007, though. Do you have anything you're working on now, Jonathan?
dhuck, let me clarify. what i am looking for is a clear path to that level of an exit without a company needing to spend more than $1-$2 million. this means getting customer traction, market validation, and revenue momentum. However, I acknowledge that some businesses require a B round to get there. I don't view this as a problem. What i do view as a problem is needing $5-$10 million before you can say "this is a via…
If not, that's great! If so, I think it's fair to include that in your criteria if it's important to you.
Earlier quoted context omitted.
$25 million is a lot of money, but so is $1 million in funding. Most web 2.0 companies need no more than $100k or so to get to profitability, and can easily exit at $2.5 million. Same ratio, but it sounds a lot more achievable. So the only real issue is scale. Bear in he's talking about enterprise software (i.e. support contracts, custom software, consultants). When you start doing custom work and get paid by the hou…
This is not the sort of situation I would invest in. If you are billing by the hour, it is unlikely to be a leveraged business, and the investment return is unlikely to be as comfortable. Additionally, due to the smaller size, there would have to be many, many investments; it's hard to find many of very good quality.
The problem with this list, in my mind, is that it's a checklist of descriptions of a successful company. If the signs are this obvious then the valuation would already be high enough to be unattractive to an angel. I've done some (roughly 8 deals) angel investing myself, and prefer to look for something market-shaped; matching buyers to sellers, or similar; a team I would seriously consider working for; and a workin…
http://www.sequoiacap.com/ideas/
(Currently down, Google cache below)
I really like the Sequoia list -- perhaps because it's like a point you can look at and aim for when trying to sort out business ideas.
if things were nearly as much of a lock as this person demands, i sure as shit wouldn't have to slum it with angel funding, i could go to a marquee vc firm
Is the grand majority of websites limited to rely on advertisement or are there some constructive guidelines to help in this subject?
A business that has an inherent call option, that could boost its base-line exit value by at least 10x I will go ahead and expose my novice status and ask: what is an inherent call option?
So all he's is saying that he is looking to invest into a business that will rise in value over time and that will be sold to a third party – "an inherent" part – and he also means that he's not looking to invest in "lifestyle"/"we'll pay out dividend"/"37sig" type businesses. And the last sentence fragment is self explanatory: he expects the value of the company to increase the value over time by at least 10x so he makes back roughly 10x on his investment (roughly since it doesn't really work out like that with IRR).
The problem with this list, in my mind, is that it's a checklist of descriptions of a successful company. If the signs are this obvious then the valuation would already be high enough to be unattractive to an angel. I've done some (roughly 8 deals) angel investing myself, and prefer to look for something market-shaped; matching buyers to sellers, or similar; a team I would seriously consider working for; and a workin…
It's similar to Sequoia's "Elements of Sustainable Companies", but well, not as focused: http://www.sequoiacap.com/ideas/ (Currently down, Google cache below) http://tinyurl.com/4byylj I really like the Sequoia list -- perhaps because it's like a point you can look at and aim for when trying to sort out business ideas.
dhuck, let me clarify. what i am looking for is a clear path to that level of an exit without a company needing to spend more than $1-$2 million. this means getting customer traction, market validation, and revenue momentum. However, I acknowledge that some businesses require a B round to get there. I don't view this as a problem. What i do view as a problem is needing $5-$10 million before you can say "this is a via…
To restate/clarify my original point (messed up the thread, my bad): getting a valuation of $25 mil to $50 mil, with a TOTAL investment of $1-$2 million is very hard. Google and a few choice companies may have done that, but I think that's definitely the exception. A lot of good companies are out there that aren't Googles (take over the entire market in 5 years) that deserve investment, as well.
These investments might not produce a valuation of $25-$50 mil after 5 years (like Google, etc etc) - but maybe they would after 10, 12, 15 years. This is where I think we agree.