3 ms·
From a financial standpoint, there is a simple way to look at this. Did the acquisition price: (a) Return the investors money? (b) Compensate the founders for
by mgmtconsultant 11y ago
From a financial standpoint, there is a simple way to look at this. Did the acquisition price:
(a) Return the investors money?
(b) Compensate the founders for the opportunity cost of their time?
If so, then the acquiring company valued the startup as being worth more than the resources that went into it, so the startup created value.
With most acquihires, I think the answer to both (a) and (b) is "no", so it's not fair to call the startup a success.
There are other considerations - the value the startup created for customers, the enjoyment of the founders, the treatment of the startup employees, and so forth. But if you burnt investor money and / or didn't make back the cost of your time, it's hard to call it a success.
- robocat 11y agoRisk needs to be included. If the chances of total failure ($0 return) are 9/10, then anything less than a 10x return is a failure in my opinion. Also as an individual, there is a cost to "volatility" so the payoff needs to be even higher to account for that too.
- neltnerb 11y agoI don't think this is the right way to look at it after you exit. At that point there is no more risk, so that should be compared directly to the opportunity cost (if you're the entrepreneur at least). If you're the VC, making exactly the expectation value (risk*reward) isn't a success, but it's hardly a failure as long as it's beating market rates...