Business 101 for startups by Fred Wilson
Last week’s post on valuation brought a couple questions about EBITDA. The first of which is how do you pronounce that acronym? The answer to that question is e-bit-dah. The second of which is what does it mean? The answer to that is Earnings Before Interest Taxes Depreciation and Amortization.
The way I like to think about EBITDA…
Last week on MBA Mondays, I talked about valuing an internet marketplace business. In that post, I talked about using 1x gross marketplace transactions and 20x EBITDA as multiples to determine value. In the comments, I was asked about multiples for other sectors. That’s a good question so I figured I’d show how to calculate…
Continue readingDetermining Valuation Multiples
Today on MBA Mondays, I am going to walk you through some math that our team does when looking at a venture investment in a company that is starting to scale its business.
Let’s assume we have a portfolio company. I will call it fit.sy. It is a marketplace for fitness experiences. We invested in it last…
Continue readingPricing A Follow-On Venture Investment
We’ve talked about this issue before here at AVC. Investors like to require that an unissued option pool is in the pre-money valuation calculation when they put money into early stage companies. If you don’t entirely understand what I am talking about here, go click on that link at the start of the post. Hopefully it will explain the…
Continue readingSizing Option Pools In Connection With Financings
Today on MBA Mondays we are going to talk about competition. For most businesses, competition is a given. When I walk to work, I am often struck how many local businesses have competitors literally right across the street. Clearly competition is something you can learn to live with and still operate successfully. In fact, there are some very good things…
Continue readingCompetition – The Pros and Cons
I’m wandering a bit on MBA Mondays right now. I don’t have a strong view of where to take this thing next. So I’m just going to post about stuff I think people should understand until I find the next vein we can mine for a while.
Today, I’d like to talk about ordinary income vs capital gains.…
Continue readingOrdinary Income vs Capital Gains
A couple weeks ago, in a comment to an MBA Mondays post, Dan Lewis wrote “LTV has to be higher than your CPA or you’re not going to make it.” I asked Dan to elaborate in a MBA Mondays guest blog post on this topic and he agreed. Here’s Dan’s post:
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Last week in MBA Mondays we talked about margins, which I defined as:
Margin is the amount of money you make on each incremental sale or unit of revenue before factoring in the “fixed costs” of your business.
That led Amish Shah to leave me this comment…
Continue readingMargins (continued)
Margin or margins is a word you hear a lot in business. I want to talk about what it means and why it is important today on MBA Mondays. I did talk about margins once before, in the context of the income statement, back when we were walking through the basic financial statements. But I’d like to…
I’m a fan of 360 reviews for companies of all shapes and sizes. I was talking to the CEO of one of our portfolio companies yesterday about his company and he said “we have about 50 employees. is it time to do 360s?” I told him that he was well past the point where he should start them. He asked for some…