Feld Thoughts

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Down Rounds: Deal With Reality

Feld Thoughts

[Brad Feld] says his “strong belief” that “just doing a clean resetting — at whatever the valuation so that everybody is aligned and dealing with reality — is much, much better for a company.” especially when many existing investors are currently willing to add on additional dollars at the most recent valuation.

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Why Gross Profit Is More Important Than Revenue

Feld Thoughts

This was before the IPO Summer of 2019 when all conventional valuation metrics have entered the land of “suspension of disbelief” which is short-term good and long-term well-we-will-see-…-eventually. We ended up talking about using Gross Profit, instead of Revenue, to do valuation analysis. Isn’t accounting fun?

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Kindred Spirits – Our Investment In Founder Collective

Feld Thoughts

We know many firms that build portfolios with great logos by buying into companies at later stages and higher valuations. FC’s portfolio is made up exclusively of seed stage investments at seed valuations. When we saw their financial track record, we realized how special the performance was.

Founder 75
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The Trap of Relative Value

Feld Thoughts

He’d gotten a random note asking about his valuation when we invested relative to another financing that was just announced. The other company, which was much smaller at the point of investment, got an 11x ARR valuation. My response to the specific situation was: Valuations have increased on a relative basis.

Valuation 143
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What Just Happened

Feld Thoughts

No one is going to raise a $100 billion VC fund and start spraying money around at fantastical valuations, followed by everyone else suspending disbelief and believing companies, regardless of their businesses, are worth 50x next year’s revenue. But it still sucked. 2003 was hard.

Revenue 172
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The Great Coding School Rollup of 2015

Feld Thoughts

revenue were the correct valuations since these are generally 5% to 10% net income businesses that are 30% – 40% gross margin and heavily dependent on (a) transitory labor and (b) favorable supply/demand conditions. Companies were being bought (and valued) at 10x forward revenue only to be valued at between 0.5x

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VC Posts That Say What The VC Thinks About How It All Works

Feld Thoughts

For example, see his post today on Valuation vs. Ownership. I’m going to hang out in the comments on Fred’s Valuation vs. Ownership post and Jason’s The “VC Bargain” post today. Venture Capital equity mendelson ownership sale valuation wilson' Fred Wilson does this regularly.

Valuation 132