Om Malik on why valuations defy metrics

The Equity Kicker

When companies attract high valuations their investors are predicting the future too – either that the business will trade in M&A at a ‘strategic multiple’ or that they will generate big cash flows. For larger valuations it is the latter.

Why Misunderstanding Startup Metrics Can Cost You Your Business

Both Sides of the Table

There has been a lot of public debate over the past several weeks about whether it’s a good thing to be “gross margin positive” or not and commentary always reminds me that some people at startups don’t quite understand financial metrics or even how to think about which ones are healthy.

Trending Sources

Startup Valuation: How Much Is Your Company Worth?

Seed Stage Capital

skip to main | skip to sidebar 19 January 2010 Startup Valuation: How Much Is Your Company Worth? One of the most common issues that concern entrepreneurs is how to address the "Valuation Question." How do we best approach the question of valuation?

How we determine valuations for marketplaces

Version One Ventures

I often get asked about how to determine the valuation for a marketplace startup that is starting to scale. Our assumptions for this valuation: Scale: > $1b GMV. In this case, metrics don’t count – we’re evaluating the team, idea, and vision.

Traction Metrics Seed Real Startup Funding And Growth

Startup Professionals Musings

That should make you wonder - how do you measure traction in a metric? I like his set of action items, and have added a few of my own for measuring early traction leading to growth: Turn initial customer goals into measurable traction metrics. Use these metrics rather than hide them.

10 Leadership Elements That Maximize Business Value

Startup Professionals Musings

In a new book, “ The Leadership Capital Index ,” Dave Ulrich, a best-selling author, business consultant, and business school professor, provides some real insights and metrics on what makes up the elements of goodwill in the minds of top valuation experts.

Pre-Money Valuation vs Number of Founders | @altgate

Altgate

I was working on some data analysis around the topic of angel round pre-money valuations (which I’ll post soon) and came up with the following interesting charts. What is interesting is that you see a peak pre-money valuation of $3.16

Can Twitter Justify Its $11 Billion Valuation?

Inc Startups

A lot of entrepreneurs are probably watching the excitement over the approaching initial public offering of Twitter and wondering if they can get a similar valuation for their companies. Using those multiples, you''d get a valuation, on the high end, of about $4.5

After 20 years: Updating the Berkus Method of valuation

Berkonomics

So how do you use financial projections as valuation metrics when you know the odds of those being accurate predictors of the future are so very unreliable? For example, $500,000 maximum value to each element yields either a maximum pre-money enterprise valuation of $$2 million or $2.5

Bad Notes on VC

Gust

There were no metrics. Him: On metrics. Me: There is no rational explanation for valuations of A round companies by ANY objective financial measure. If we priced it based on any metrics your company would likely be worth less than 7 figures at your A round. How do you think they’ll feel if your next round is at a $50 million post money valuation and their hard-earned $25,000 is worth 0.05% of your company? People seem concerned about valuation. This week.

The Profit Imperative

Seth Levine's VC Adventure

Let’s start with what I labeled the Growth Imperative a few months ago in a post, where I pointed out 1) that investors were (over) valuing growth and 2) that when this changed it was going to change quickly (and in a separate post said: “when the growth imperative shifts to a profit focus, companies with high burn and weak operating metrics can get stuck in the lurch.”). Valuations are Down.

When Does Your Company’s Identity and Brand Matter? | BoS USA 2015 | Robert J Moore, RJ Metrics

Business of Software Blog

Robert J Moore, CEO, RJ Metrics. Robert J Moore, RJ Metrics: I am back. The company’s called RJ Metrics. Like, nothing will consistently work at each stage of size in your company and as we think about all the different things that have broken over the course of building RJ Metrics — this talk by the way is going to be super embarrassing. And this was the last website that I had designed prior to starting RJ Metrics.

You Are What You Measure, So Choose Your KPIs (Incentives) Wisely!

Occam's Razor

While there is a great deal of appreciation for the power of metrics/data, I've come to realize that Sr. Leaders don't quite appreciate the deep, and often corrosive, consequences of choosing metric x over metric y as a key performance indicator (KPI).

SaaS Math Slides

StartupCFO

Last week I spoke with some entrepreneurs at MaRS in Toronto on one of my favourite topics: SaaS Math – covering metrics, pricing and valuations. Management Metrics Resources SaaS

How I Got Jeff Bezos to Invest in My Fund (And My Career)

Inc Startups

Marketplaces, financial metrics, valuation, retail strategy, competition, you name it, we talked about it

Public SaaS Valuations Are Diving. How Should You React?

Southeast VC

I received data 48 hours ago from Pacific Crest which shows valuations of SaaS companies in a sharp decline. We think most valuations were WAY out of whack so none of this came as a surprise to David or me. Because the “new normal” valuation metrics have changed.

LP 6

Cracking The Code: SaaS business metrics: why are they different?

Cracking the Code

SaaS business metrics: why are they different? Different models require different performance metrics. developed a white paper on performance metrics for Technology service Vendors (TSV) and this post present the key elements of his reflexion adapted for SaaS companies.

The Truth About Early Stage Pre-Money Valuations

Ask the Angels

I think there are three fundamental truths regarding the valuation of early stage businesses by potential investors: The first is that a pre-money valuation is ultimately an outcome of negotiation , rather than a mathematical calculation of discounted cash flow or any other metric of potential company performance. Investors typically arrive at reasonable valuation conclusions after a process of due diligence. By Al Schneider.

Woman-Oriented Startup: $4 Million Funding in 4 Weeks, $100 Million Valuation

Up and Running

Based on its recent funding, the success of its predecessors, and its quick adoption, we estimate a $100 million valuation. Pay close attention near the end where Alyson asks Alexa about the metric, the hard numbers, that sparked investor interest. I was browsing yesterday when I picked up this post by Alyson Shontell of Business Insider on LearnVest, a finance tools and information site for women, founded by a 27-year-old woman and funded very quickly by major venture capital.

Conversations with Richard Chino, pt. 1

Ask the Angels

Blog General Angel Angel Investing Board of Directors Conversant Exit Strategies Fundraising GoTo.com Idealab Pasadena Angels Richard Chino Silicon Graphics Smarter.com Startup Companies Startups Valuation ValueClick VC Richard Chino is passionate about investing in the business environment.

Lessons Learned: The three drivers of growth for your business.

Startup Lessons Learned

Master of 500 Hats: Startup Metrics for Pirates (SeedCamp 2008, London) This presentation should be required reading for anyone creating a startup with an online service component. Daves done a great job of articulating the key metrics you want to look at in each of these five areas, and I wont bother repeating them here (go read the presentation already). He also has a discussion of how your choice of business model determines which of these metric areas you want to focus on.

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Thomas Smale, Professional Website Broker, Explains How To Value Your Website, How To Find A Buyer And Everything You Need To Know About Website Flipping

Entrepreneurs-Journey.com by Yaro Starak

After the quick background story, we then dive into pretty much everything you ever wanted to know about how to sell a website, including - How Thomas determines the value of a site and what metrics matter most Which sites Thomas sells on Flippa (in 2011 his company sold 1.3

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Cracking The Code: SaaS Multiples: Recovery or Bubble?

Cracking the Code

Detailed SaaS Spreadsheet (Valuation and CAC benchmark). SaaS 13 Index Valuation. SaaS business metrics: why are they different? Cracking The Code. Thoughts from a Venture Capitalist on Software, Software-as-a-Service (SaaS), Cloud Computing, Internet and more.

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SaaS Math: Activation, Retention and Churn

StartupCFO

As you will see, churn and retention are the most important metrics to the long-term success of a SaaS business. Churn – the most important metric to a SaaS business. Finally, the most important metric for the long term success of a SaaS business is the customer churn rate.

“Understanding Social Platforms,” now summarized in a presentation deck

Version One Ventures

We also cover important topics for social platform businesses like metrics, exits, valuations, and our outlook for future opportunities in social. Two months ago, we published our second eBook, Understanding Social Platforms. In it, we discuss the dynamics of each social platform type: messaging, private networks, public networks, enterprise networks, and communities.

Iterating Without Understanding?

Startup Marketing Blog

The other group is completely focused on metrics driven iteration. I started in the camp of online metrics and scorned the beanbag marketers who didn’t “get” analytics. At Uproar in the mid to late 90s, metrics were our competitive advantage. Ultimately, this obsession with leveraging metrics to track ROI and improve conversion through iteration was key to becoming the worldwide leader in online games and peaking at a billion dollar stock market valuation.

Spectacles and $SNAP’s $20B Valuation

Austin Startup

In order to achieve 20x growth, Snap needs grow both of those metrics 4–5x. In summary: Snap’s current business doesn’t justify a $20B valuation. How can one justify a $20B valuation for Snap? The product that could most likely justify Snap’s $20B valuation is Spectacles.

Unicorpse

Feld Thoughts

But a lot of these are paper unicorns, so their valuations may not be real for a while.” Last week Salesforce CEO Marc Benioff also predicted dead unicorns as startups seem to focus more on their valuations than their customers.”

The wrongness of relativism

A Smart Bear: Startups and Marketing for Geeks

What does it actually mean that metric X is better than average and metric Y is below? Instagram had 13 employees when they sold for a billion dollars. Was there any startup founder who didn’t feel depressed when that happened? Yes, depressed.

Looking for investors? Here’s how to value your startup

The Next Web

One of the questions I get, more often than not, is what is the appropriate valuation of my business. multiple interested investors competing for the deal, and driving up your valuation in the process). Each industry typically has its unique valuation methodologies.

Key Elements of a Massively Scalable Startup

Startup Marketing Blog

Startup Marketing Blog – By Sean Ellis Unlocking Startup Growth By Sean Ellis of 12in6 May 17th 10 Key Elements of a Massively Scalable Startup VC backed startups generally aspire to valuations in the hundreds of millions or even billions of dollars, but very few really consider all of the elements they’ll need to make it happen.

Transparent Funding Announcements

Feld Thoughts

Now that everyone is overly focused on unicorns, the headline number on the valuation (e.g. Company X raised Y at a valuation of Z from A, B, and C) has crept into the story on big rounds. No underlying metrics that drive the financing. Kyle followed the tradition of extreme openness about the financing process that I think Rand Fishkin started with his post three years ago titled Moz’s $18 Million Venture Financing: Our Story, Metrics and Future.

Business Prenup: What To Do Before You Start A Company With A Partner

YoungUpstarts

A CPA provides input on tax structure and metrics, and assists with due diligence related to your industry. Plan for your company’s eventual valuation. Proper planning for a valuation can make this process much smoother. a valuation and litigation consultancy firm.

Screw the Black Swans: Ichiro is our role model, not Barry Bonds.

500 Hats

However we primarily scale geographically, through our people and our community, through our own systems and metrics, and through the broadest possible diversity of gender, race, religion, and language. Not to mention get them the highest possible valuations at demo day.

Beware the Sky-High Valuation

Inc Startups

It''s natural for entrepreneurs to want the highest valuations for their company, and lately those valuations have soared. A large of number of tech start-ups including Fab, Path, Evernote, and Snapchat have joined the Billion Dollar Valuation Club.

Ten million users is the new one million users

Chris Dixon

For consumer startups with transactional models, e.g. e-commerce, the number of users required is often far lower because revenue is the more important metric. Be prepared for lower valuations for non-transactional early-stage consumer startups (breakout later-stage companies, on the other hand, will likely continue to command high valuations). Entrepreneurs and investors have been enamored with consumer internet startups for the last few years.

Why are the majority of angel investors focused on opportunities with large TAM?

Gust

Therefore, if the maximum market cap we can hope for from a company is $2 million at the end of the day, and our investment needs to return 30x, that means the post-money valuation after our investment needs to be $2m ÷ 30, or $66,666.

The Morning After

Both Sides of the Table

When they’re bullish venture valuations go up, LPs put more money into VCs, more angels want to get involved, new entrants (hedge funds, mutual funds) feel their missing out and the overall venture market goes us.

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The Coming Zombie Startup Apocalypse

This is going to be BIG.

I have a feeling that a lot of these "on demand" companies aren''t going to be as gamechanging as we think--and will come back down to earth with valuations that look more like temp agencies than the next big thing. But at what valuation? Are we in a bubble?

Andreessen Horowitz: No bubble but rebalancing from IPO to late stage venture

The Equity Kicker

Firstly this table comparing 1999 and 2014 on key bubble-related metrics. That makes sense, but it looks to me as if they have less valuation discipline than we normally see in either the public markets or in smaller venture rounds.