M&A Ladder: Position Your Startup To Sell it For More(blog.eladgil.com)
blog.eladgil.com
M&A Ladder: Position Your Startup To Sell it For More
http://blog.eladgil.com/2011/01/m-ladder-position-your-startup-to-sell.html
3 comments
I really enjoy this article. It really shows that there is more to being acquired than creating a throwaway product just so you can be the target of some HR acquisition.
Great article Elad, great insight and perspective on the various factors to consider when building/growing a startup.
Layers of valuation - Level 1: Talent, Level 2: IP, Level 3: Product, Level 4: Market Validation, Level 5: Profits, Level 6: Branding
Level 1 can be multiplied by connections to people with influence and deep pockets. Level 2 can be multiplied by a proven, protectable technology that speculatively can solve a very big product problem. Level 3 can be multiplied if it addresses a very large market. Level 4 can be multiplied based on traction - users / revenue. Level 5 can be multiplied based expected growth rate of profits. Level 6 can be multiplied based on the businesses presence in the industry, and/or with its customers.
For me, its useful to look at the valuation as a function of risk mitigation based on asset class. For instance, where Elad points to 'Team Hire' and 'Team Buy', in both cases I think risk mitigation is largely a function of the talent reputation of the team in the eyes of the potential buyer. In this sense (reputation-based), any valuation of talent acquisition can be viewed as the net social capital of that team. However, this valuation basis become irrelevant with the presence of a solid product or intellectual property.