Powerball: The Difference Between Gambling and Investing

Non-Linear Growth

What was unusual about this Powerball drawing is that the NPV of an investment in a ticket was not far from break-even. I encouraged them to not only think about the NPV of the investment but also to look at the distribution of returns. We considered the question: Even if buying a Powerball ticket had a positive NPV, would it be a good investment? With such high odds of losing, does it even matter if the NPV is positive?

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"Organic users typically have a higher NPV, a higher conversion rate, a lower churn, and are more."

Mark Birch

“Organic users typically have a higher NPV, a higher conversion rate, a lower churn, and are more satisfied than customers acquired through marketing spend. LTV heavy companies are in denial about this point.” - “ The Dangerous Seduction Of The Lifetime Value (LTV) Formula ” by Bill Gurley. LTV startups marketing metrics spend

Trending Sources

6 Critical Marketing Metrics To Nail Today’s Buyers

Startup Professionals Musings

In addition, the best companies compare the negative and positive cash flows over a period of time to determine the net present value (NPV) of planned future marketing spending.

Non Recurring Revenue Businesses

Rob Go

The assumption here is that that increased value is NPV positive based on other potential uses of the capital that you could have gotten up front. I’ve been thinking a little about non-recurring revenue businesses. Particularly, businesses where transactions are large, but infrequent.

10 Rules of Thumb for Startup Investment Valuation

Gust

NewCo is projecting revenues of $25M in five years, even with a 40% discount rate, the NPV or current valuation comes out to about $3M. Image via eHow.com.

Why (and How) Optimizers Should Take Advantage of User State Models

ConversionXL

In this case receiving 6 texts has a PPV of 26% and an NPV of 93%. What’s more, an NPV of 93% means that people not exhibiting this behavior are almost definitely going to churn, lending further evidence to the need to get people receiving the texts. William A.

From the Vault: 7 biases that can effect your decision making

crowdSPRING Blog

In economic valuation, past cost can never be a factor for arriving at a value, and formulas such as NPV (net present value) will never take into account money which has already been spent. EDITOR’S NOTE: We originally published this post back in 2010.

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Burnham's Beat: Edgeio and the ?Write Once, Publish Everywhere.

Burnham's Beat

« Vonage: Its All About Customer NPV | Main. Burnhams Beat. Articles on Technology and Finance. About Bill. Archived Posts. Blog Roll. IPO/M&A Lists. By Category. By Month. Recent Posts. Internet IPOs. Internet M&A. Software IPOs. Software M&A. Search This Blog. Subscribe to This Blog. RSS/ATOM Feed. Subscribe Via Email. Long or Short Capitals Web 2.0 Analysis » 02/13/2006. Edgeio and the “Write Once, Publish Everywhere” Web.

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the vc in me.: The DISRUPTION of Brands

the vc in me

I wonder if that creates a lower NPV given the preponderance of the terminal value in any NPV calculation. the vc in me. Welcome! This blog broadcasts my thoughts on sectors of interest in my role as a venture capitalist as well as other ideas or tidbits on the business of entrepreneurship. I hope to engage entrepreneurs, VCs, and anyone else in dialogue! Archives. Profile. Subscribe. « Guest Post from HBS Professor: The Nuances of Marketplaces | Main.

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Website Valuation Methods

Blogtrepreneur | Entrepreneur Blog

You then map out the cashflows of the website, discount them back to their value today (known as the Net Present Value, or NPV), add up the NPVs coming from the different cashflows, and arrive at a valuation. Author Bio. George is a website investor and writes about website investing, due diligence, and earnings optimization at WiredInvestors.com.

How to create a profitable Freemium startup (spreadsheet model included!)

andrewchenblog.com

Andrew Chen New here? Check out my list of featured essays How to create a profitable Freemium startup (spreadsheet model included!)

Are MBAs Necessary for Start-ups or VC?

Both Sides of the Table

Don’t forget that long after you forget the CAPM pricing model, how to do regression analysis or how to calculate NPV without a spreadsheet – your network should endure. This is part of my ongoing series called “ Start-up Lessons.&#.

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Business Model Analysis, Part 6: LTV and CAC

Platforms and Networks

Up to some point—I* in the figure below—increasing investments should boost a firm’s net present value (NPV), but at a diminishing rate as the cost of acquiring each additional customer rises. This post is part of a series on business model analysis for entrepreneurs.

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Angel Investment Criteria

SoCal CTO

The example he uses is: THE RAISE Investment $500,000 Pre Money $600,000 Post Money $1,100,000 OWNERSHIP Founders 55% Investors 45% EXIT Sale Price $5,000,000 Time 5 years INVESTOR RATIOS ROI 355% Multiple 4.55x IRR 35% NPV @ 10% $828,000 Admittedly that valuation and the resulting ownership causes me to wonder, but the most interesting aspect is that Bob is talking about investing in a much smaller exit, with no future investment planned.

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Building a Growth Agenda? Keep It Simple

Inc Startups

A detailed NPV (net present value) calculation is not always necessary but may be useful to categorize opportunities in terms of size and risk. A short list of high-value opportunities will keep you focused on what really matters.

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Passion: What Every Startup Needs, but Never Talks About

Launching Tech Ventures

The NPV of these jobs is much higher than doing a startup. Even with passion the NPV of a startup is horrible. By Gabriel Parisi-Amon Over the past few years “I’m doing a start up” has become the mid 2000s version of “I’m an investment banker.” And although I believe that more awareness about starting ventures is a great thing, I think that following the herd into the startup world is dangerous.

eCommerce RULE #2: Customer Lifetime Value (CLTV) is your new pulse

Adventurista

The textbook definition of CLTV is the net present value (NPV) of the profit from a customer’s purchases.

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Who's Who of Angels - Startups and angels: Along the way to success

Tim Keane

Download of_angel_investors_npv_and_irr.pdf. Download of_angel_investors_npv_and_irr.pdf. Startups and angels: Along the way to success. By Tim Keane, Angel Investor, Golden Angels Investors, LLC. Archives. Profile. Subscribe. « Managing Investor Relationships | Main. Reduce Your Startup Risk » July 06, 2006. Whos Who of Angels. This is an interesting article from todays VC Experts website (vcexperts.com) that they forwarded to me.

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Startup Blog: Getting Rights to the Technology

Taffy Williams

One common way to do this is via an NPV (Net Present Value) calculation in a spreadsheet or a second is to determine value based on comparables in the market place. Startup Blog Steps to consider to start and grow a company. Basics are provided to help entrepreneurs.

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Tips for small business: 7 biases that can effect your decision making

crowdSPRING Blog

In economic valuation, past cost can never be a factor for arriving at a value, and formulas such as NPV (net present value) will never take into account money which has already been spent. Einstein once said, “Common sense is the collection of prejudices acquired by age eighteen.&# Common sense, Einstein was arguing, can often be the enemy of rationality, science, and fact-based decision-making.

The product-market fit obsession

Launching Tech Ventures

If we learned anything from RC Fin, it's that for-profit businesses are as valuable as the NPV of their expected cash-flows. By Mike Rothenberg Marc Andreessen famously writes that "the only thing that matters is product-market fit" (1).

eCommerce RULE #3: The 6 “Cs” are your vital signs: Ignore them at your peril!

Adventurista

As discussed in Rule #2 , CLTV is the net present value (NPV) of the profit from a customer’s purchases. These 6 “Cs” are metrics that provide an unparalleled window into the health of your online retail business.

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An Angel Investor’s Thoughts on Valuation

Ask the Angels

Two other statistics that also come up are Net Present Value (NPV) and Internal Rate of Return (IRR). NPV @ 10% $828,000. Following on the heals of last week’s post from Andrea Belz, we have another guest blogger, Bob Aholt. Bob is a Director and long-time member of the Pasadena Angels, has been investing in early stage companies for 5 years, and has been held numerous “C” level positions at private and publicly traded companies.

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Ten Components of Startup Valuation For Investors

Startup Professionals Musings

NewCo is projecting revenues of $25M in five years, even with a 40% discount rate, the NPV or current valuation comes out to about $3M.

A smart investor fortunate enough to gain Harvard admission should get an MBA

Launching Tech Ventures

If you value the NPV of the expected cash flows in your life, it is not clear either way. By Mike Rothenberg I’d like to write a response to a WSJ editorial by 24-year old college drop-out Dale Stephens earlier this month, entitled “A Smart Investor Would Skip the (Harvard) MBA”.

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If the passion is gone.

Launching Tech Ventures

It almost takes an irrational passion to pursue the NPV path of a particular startup. By Jacob Montoya As an entrepreneur following the lean startup philosophy, how do you know when to stop pivoting and pull the plug on your venture? Is this decision easier or harder in a lean startup? Deciding when to stop pivoting and pull the plug can be a difficult decision, but it is easier for those pursuing the lean startup philosophy.

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The art and science of valuing websites

The Next Web

Income-based valuations consider aspects like CAPM (capital asset pricing model), IRR (internal rate of return), NPV (net present value), WACC (weighted average cost of capital), NCF (net cash flow), and GAAP (generally accepted accounting principles).

allensblog: Too Much of a Good Thing.?

Allen's Blog

We don't want to criticize Google for making positive NPV investments even if they have much lower ROI than their core products. allensblog. Thoughts from a startup sherpa. Archives. Profile. Subscribe. « Clothes (Online) Make the Man | Main. Quick Notice about the NYT Situation » May 20, 2007. Too Much of a Good Thing.? Historians (especially economic historians) widely believe that nations that discover a single huge natural resource (e.g.,

Burnham's Beat: Virtual Stock Portfolio: January 2006

Burnham's Beat

Vonage: Its All About Customer NPV » 02/02/2006. Burnhams Beat. Articles on Technology and Finance. About Bill. Archived Posts. Blog Roll. IPO/M&A Lists. By Category. By Month. Recent Posts. Internet IPOs. Internet M&A. Software IPOs. Software M&A. Search This Blog. Subscribe to This Blog. RSS/ATOM Feed. Subscribe Via Email. « A Unified Theory of Search, Social Networking, Structured Blogging, RSS and the Active Web | Main. Virtual Stock Portfolio: January 2006.

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