Good for them, with just a 500K investment I would guess the following<p>1. The founders should own at least 75% of not more which gives them a neat 30M in this deal.<p>2. As others pointed out, why such a poor multiple on revenue? The possibility is that they had a service heavy business (ie bulk of revenue came from service to customers).<p>3. From point 2, they mostly had negligible or no IP. If they had significant IP and sold for this multiple then it is a poorly made deal.<p>4. They raised only 500K, ie equity capital. There is no mention about their debt & other liabilities. This could be another reason for the low multiple.<p>5. Deal type is key, if it was cash it is good but if it was equity/options, then not so good.<p>We closed our acquisition beginning of this year as follows:<p>Value: 9.5M USD
Type: Cash
Revenue: ~1M USD
Valuation: 10X
Investment: 300k USD
Debt/Liability: nil
Status: Profitable
Investor returns: 5X
Location: India
My instinct tells me that this is a much better outcome for founders and many employees than “unicorns”.<p>It’s possibly not as good an outcome for investors, and they might actually view this as a bad exit.<p>Am I wrong? Would most investors be pretty happy with this? Would most founders/employees be better of going for creating a unicorn?
For context, $500K is a big investment in Canada. Startups here get very little funding. Smart Silicon Valley investors could make bank by investing in Canadian startups for pennies on the dollar.
The article states that they're on track to get $30M in revenue in 2018.<p>At $53M (CAD), that's just a little over a 1.7x multiple<p>Isn't that a little low? I've seen crappy AdSense websites go for 2x multiples
Lots of people think about the low rev multiplier but maybe a) the founder, all being quite young, just wanted out and do something new, b) the money is all in cash without strings attached or c) they have a sense that with the GDPR in europe and similar laws possibly coming up elsewhere their company and revenue might plateau rather soon.<p>If someone offered me >10 million, I'd take the money and run.
A little bit about the company<p>That's a cookie cutter Internet ads DSP shop with few buzzwords painted over on top, namely the alleged "smart AI algorithm." Something now standard.