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

by eladgil • 16 years ago

57 3 16 years ago

blog.eladgil.com

jonmc12• 16 years ago

Elad's articles are always insightful. I had a similar discussion recently with a friend of mine, and here is what we came up with from our point of view:

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.

j_baker• 16 years ago

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.

ericwu01• 16 years ago

Great article Elad, great insight and perspective on the various factors to consider when building/growing a startup.

M&A Ladder: Position Your Startup To Sell it For More

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