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as opposed to a Pre-Revenue Company that has no revenues and no immediate chances of gaining revenues. A Revenue hopeful Company is preparing and working towards quickly being ready to begin generating revenue. While that is correct, consider at least one nuance. When VC's and particularly Angel groups discuss valuation, they want to know revenue. The valuation goes up with verified sales. But...it would be incorrect to say that if you had zero sales, the valuation automatically goes down. In fact, "automatically" is way too close to an algorithmic model. People are people and susceptible to being persuaded by matters beyond recent sales figures. Facebook had zero sales but was VERY revenue hopeful and had the studies and concept that blew the doors off the Angel safes and had a 300X of projected revenue valuation. I've worked on several deals where the prospective investors discounted the sales in favor of the highly plausible opportunities for large growth. And it paid off. Stated another way (and perhaps belaboring the point but I offer this if you need further clarification) A Revenue company refers to a discussion on is in relationship to the valuation of the company. When we look to invest, we hope to see sales - revenue - to help us predict future sales opportunities. That is dangerous because we don't know if they were lucky to start and won't keep the streak going. Or, it may be like software that might make $20 million in sales in 2017, $30 m in 2018, $40 m in 2019. GREAT we say extrapolating that 2020 ought to be even better. We invest and, voila, a Microsoft comes out with better, cheaper software that does the same and more and they have a $50 m ad campaign and it wipes us out. A Revenue Hopeful company is one that shows a promising proforma, great logic in the marketing plan, a terrific inventive pioneering game: changing technology. To make it Revenue Hopeful, they show letters of demand for the product from great customers, some purchase orders, so we conclude that they are reasonably hopeful that revenue will come. The weird part is the Revenue company may go out and try to get more financing in 2019 based upon great sales and thus have a very high valuation:: maybe 3X one year's revenue (3 X $40 m= $120 million valuation. If it issues 1 million shares, they'd sell for $120 per share).
The Revenue Hopeful company has great fundamentals and assumptions that seem VERY conservative on income and very exaggerated (liberal) on expenses with an EBITDA of $5 m in the 3rd year of the Proforma. So, they have proposed that this is their valuation. With 1 million shares, that makes it $5 per share (1,000,000 x $5 = $5 m) VERY cheap in comparison.
When Facebook and Google went public, they either had no revenue or like Amazon were operating in the red. They were all Revenue Hopeful companies to some degree. The sold for $200 or more per share.