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> $600 million in revenue Napkin math time. Assuming 30% profit (very achievable for a tech biz that size), thats $90M a founder per year (if they want). I wou
by mbesto 8y ago
> $600 million in revenue
Napkin math time. Assuming 30% profit (very achievable for a tech biz that size), thats $90M a founder per year (if they want). I would take that over the risk of trying to get to a $1B sale any day of the week. There aren't very many industries that can achieve something like this. What a time to be alive.
Note - I understand their are so many assumptions here, but I think my point still remains.
- jogjayr 8y agoIf they have $600MM revenue, then even applying a modest 5x multiplier would give them a $3B valuation right? And 10x might be closer to what they might actually fetch if they were to ever sell.
- traek 8y agoMultipliers are on earnings, not revenue. A “modest 5x multiplier” on Walmart’s revenue would give them a valuation of $2.5 trillion.
- mcbits 8y ago15x is modest for a virtual-product company net earnings, in cases where there are earnings after the accountants are done. A 5x multiple of revenue would value Netflix around $60 billion. And if Walmart had the assumed 30% margins, they probably could be a $2.5 trillion company. Their revenue is more than 2.5 times their almost-$1 trillion competitor.
- qubax 8y agoAlso, standard multipliers are pointless on "unicorns". You have to figure out potential for future growth and the potential of the space itself. Facebook bought instragam for $1 billion even though there was no significant revenue or income. But the potential for growth of instagram itself and the photo sharing social media space was immense. With established companies like walmart in establish spaces like retail, you know what you are getting. With tech unicorns, it's a bit of a gamble.
- jogjayr 8y agoIt depends. For a mature business like Walmart, you'd look at EBITDA, and margins to arrive at a valuation. For a growth business, especially a SaaS business, revenue might be used until there's actual earnings.
- mrnobody_67 8y agoYeah, valuation seems low... Look at marketo for a good comp: 21x EV/TTV - http://tomtunguz.com/marketo-vista-ma/ http://tomtunguz.com/marketo-vista-ma/
- erikb 8y ago30% profit. You might consider a career as fantasy author.
- kondro 8y agoThey only have 500-1000 employees.
- erikb 8y agoMy toilet paper at home has four layers. (Same amount of relevance)
- hazz99 8y agoSaaS can easily get there, and much higher.
- SmellyGeekBoy 8y agoWhat? I know people in brick-and-mortar mail order business who make that kind of margin. SaaS could be much higher.
- erikb 8y agoYou mean you read blogs where people claim that amount of profit over a span of 3-6 months.
- mbesto 8y agoBuffer, who's finances are transparent, would like to have a word with you: https://twitter.com/joelgascoigne/status/1045434059629838336 https://twitter.com/joelgascoigne/status/1045434059629838336
- Cthulhu_ 8y agoI have no doubt they both earn a very decent salary that allows them and their families to live very comfortably.