Every venture firm reports the “value” of each of its underlying investments. Typically, this is updated quarterly and sent to each of the fund’s investors. The idea is that investors will then have a definitive view of the value of the firm’s investments. Simple, right? But what is the “value” of a private company? Turns out the answer to that question is not so easy to determine, and, as a result, valuation reporting in venture is a mess. Prior to 2007, most firms held company valuations at the price of the most recent round. This was relatively straightforward and generally pretty consistent across funds. The rationale for this approach was that the best indicator of value was the last “market”…
Tag
valuations
How to value your SaaS company
If you read my blog regularly you know I love (LOVE) metrics. So no surprise that when River Cities Capital released an overview of SaaS operating and valuation benchmarks, I hung on every juicy detail. It’s chocked full of them – I’d highly recommend your reading the full report. But if you’re too busy for that, below are some of the key take-aways. I’ve added color commentary of my own that’s more relevant to earlier stage companies as well. The methodology here was great. They took the 92 public SaaS companies and analyzed their key operating metrics. Beyond that, they actually went back in time and looked at the earlier stage periods for these companies so we can track how…
The Profit Imperative
With the markets crashing around us and the sky once again falling I thought it was time to revisit a few fundamentals and perhaps more importantly share some what what we’re now seeing in the private funding markets. Growing Profitably. 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.”). It always amazes me how quickly the markets can shift and how…