The Revenue Multiple
For the last 10+ years I have been working in the startup world. It moves fast, breaks rules and changes the world - it's awesome. While some rules do get broken, there are more fundamental rules that do not.
Unit Economics Fundamentals
Unit economics is a term that is increasingly thrown around in the startup ecosystem, and for good reason - it is the underlying concept that makes investing in growing but unprofitable businesses worthwhile. In order to understand the unit economics of a business, you have to first identify the unit.
Generally Accepted Accounting Principles ( GAAP) were put into effect in 1933, at the tail end of the great depression. These principles aimed to increase consistency, prudence, regularity and continuity to business reporting. Over the last 88 years, business has undoubtedly changed, and those changes continue to accelerate in the 21st century with new business models driven by the power and availability of technology.
Crossing Over on Causal.app
Until around 2007, the total energy that a solar panel could produce during its usable life was less than the energy it took to manufacture and deliver that same solar panel.
Thin Slicing ARR
I have spent the last 6+ years studying the SaaS business model and I realized early on that it's critical to separate out the drivers behind ARR according to their operating levers. In order to better understand how a business is running (i.e. diagnostic metrics) and then help it improve (i.e.
How I Evaluate Companies
A few years ago, I was doing an informational interview with a potential candidate who asked me: "how do you evaluate companies in Venture Capital?" She was coming from the world of investment banking and the other opportunities she was looking at were in the buyout private equity world, where evaluation techniques are generally very methodical.
Equity Comp - What Happens Next....
The Old Normal Too many Founders, CEOs, Venture-backed BODs are feeling good about themselves and even proud that they have avoided laying off employees - mostly due to the fact that they have recently raised capital and have more than 24 months of PERCEIVED cash runway.
You pick the Valuation, I set the Terms...
This is an old adage in the world of venture investing that represents the potentially massive disconnect between the "valuation" on the term sheet and the returns in various exit scenarios. I put "valuation" in quotes because of this disconnect.
2018 Software IPO Analysis - End of the Year Update
In May I published a detailed analysis of the software IPO market, which can be found here: https://medium.com/@Alexoppenheimer/software-ipo-analysis-2095bf2b7337 I updated the metrics for current prices, new IPOs and new M&A deals and have included the updated analysis below. 2018 was a very strong year for IPOs and M&A despite a correction in public markets at the end of the year.