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Cluep, a Canadian startup that raised just $500K, acquired for $40M

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Re: Cluep, a Canadian startup that raised just $500K, acquired for $40M

#11

Post by xevb3k »

keithwhor wrote: post #7
xevb3k wrote: post #5

My instinct tells me that this is a much better outcome for founders and many employees than “unicorns”. It’s possibly not as good an outcome for investors, and they might actually view this as a bad exit. Am I wrong? Would most investors be pretty happy with this? Would most founders/employees be better of going for creating a unicorn?

Given that Cluep is Canadian, I would expect the $500k they raised to be on a $2M Cap convertible note or some similarly valued instrument. That's totally a guess, btw. They could've sold way more or way less of their company. But, ballparking here. So, ~20x return over 6 years for investors that are likely non-institutional. In short -- it's probably a very good deal for Angels. That's about a 65% YoY compounded ret…

For Angels but what about seed funding? YCombinator/Other incubators?

Re: Cluep, a Canadian startup that raised just $500K, acquired for $40M

#12

Post by keithwhor »

xevb3k wrote: post #11
keithwhor wrote: post #7

Earlier quoted context omitted.

Given that Cluep is Canadian, I would expect the $500k they raised to be on a $2M Cap convertible note or some similarly valued instrument. That's totally a guess, btw. They could've sold way more or way less of their company. But, ballparking here. So, ~20x return over 6 years for investors that are likely non-institutional. In short -- it's probably a very good deal for Angels. That's about a 65% YoY compounded ret…

For Angels but what about seed funding? YCombinator/Other incubators?

There's likely not much if any institutional money involved in a $500k raise.

If there was, then it's not as great of an outcome, but to an institutional investor this would likely just have been a "let's see what happens" check -- which makes it pretty good regardless.

Re: Cluep, a Canadian startup that raised just $500K, acquired for $40M

#15

Post by acangiano »

keithwhor wrote: post #9
acangiano wrote: post #8

For context, $500K is a big investment in Canada. Startups here get very little funding. Smart Silicon Valley investors could make bank by investing in Canadian startups for pennies on the dollar.

That could be a start, but this is the wrong mentality. Investors shouldn't back Canadian startups because they're cheap. That's almost a distinctly Canadian view of investment -- get things cheap, undervalued, or with a low risk profile. (Sorry, Canada, somebody in Canadian VC is going to roll their eyes at me here but it's pretty accurate.) They should back Canadian or Canadian-led startups because talent is underv…

I meant cheaper while still offering the same degree of talent. Not just cheaper. But I think you raise very good points about framing the discussion in terms of talent rather than cost.

Re: Cluep, a Canadian startup that raised just $500K, acquired for $40M

#17

Post by frankdenbow »

lquist wrote: post #14

“Everyone loves a tale of a bootstrapped startup founder’s journey to an eight-figure exit.” How is raising $500,000 bootstrapping?

The point is that they grew their business mostly out of revenue. Yes you can get into a technical discussion of what a self-funded company is, but it generally misses the point. Setting yourself up so that you can be sustainable out of revenue at times requires a different approach and mindset which is at the core of self-funded companies.

Re: Cluep, a Canadian startup that raised just $500K, acquired for $40M

#18

Post by willwinger »

Good for them, with just a 500K investment I would guess the following

1. The founders should own at least 75% of not more which gives them a neat 30M in this deal.

2. As others pointed out, why such a poor multiple on revenue? The possibility is that they had a service heavy business (ie bulk of revenue came from service to customers).

3. From point 2, they mostly had negligible or no IP. If they had significant IP and sold for this multiple then it is a poorly made deal.

4. They raised only 500K, ie equity capital. There is no mention about their debt & other liabilities. This could be another reason for the low multiple.

5. Deal type is key, if it was cash it is good but if it was equity/options, then not so good.

We closed our acquisition beginning of this year as follows:

Value: 9.5M USD Type: Cash Revenue: ~1M USD Valuation: 10X Investment: 300k USD Debt/Liability: nil Status: Profitable Investor returns: 5X Location: India

Re: Cluep, a Canadian startup that raised just $500K, acquired for $40M

#20

Post by rajacombinator »

keithwhor wrote: post #9
acangiano wrote: post #8

For context, $500K is a big investment in Canada. Startups here get very little funding. Smart Silicon Valley investors could make bank by investing in Canadian startups for pennies on the dollar.

That could be a start, but this is the wrong mentality. Investors shouldn't back Canadian startups because they're cheap. That's almost a distinctly Canadian view of investment -- get things cheap, undervalued, or with a low risk profile. (Sorry, Canada, somebody in Canadian VC is going to roll their eyes at me here but it's pretty accurate.) They should back Canadian or Canadian-led startups because talent is underv…

SV investors are not the be all end all. The historical track record of the VC industry is quite bleak.
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