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0 pointsnoelwelsh12y ago0 comments

Those funds exist. They're smaller funds. Everpix was going to the "best" (biggest) VC funds and asking for a relatively large amount of money for a Series A. VCs typically aim for 10x return (let's keep the hyperbole out of this discussion, please) so Everpix indicated they expect a return of at least (1.5M + 5M) x 10 = 65M. Add in later rounds of funding and the ~1B goal is not unrealistic.

It takes a roughly constant amount of time to do a deal, so funds have a minimum deal size below which they aren't interested.

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5 comments · 2 top-level

001sky12y ago· 2 in thread

VCs typically aim for 10x return (let's keep the hyperbole out of this discussion, please)

Thats why I said $100m should work. You suggest $65m. That's the same order of magnitude. It was reported that the VCs were turning them down because $1B was "never gonna happen"[1]. That's why the math piqued my interest. If its just reporting hyperbole...that would be one explanation.

[1] Which implies they were looking for that extra ~order of magnitude

noelwelshOP12y ago

You're assuming their business plan included only the one round of funding. I'm assuming they were planning extra rounds or the VCs believed they would need extra rounds.

If they went up to, say, a Series B at 10M and a Series C at 20M, which are reasonably conservative multiples, they are at ~36.5M, so looking for a ~400M exit. It's not hard to need that ~1B exit if your business plan is "everyone in the world using my product," and it appears this is what Everpix were aiming for.

001sky12y ago

I hear what you are saying. But i still feel like there is some mixture of thought that should let these guys take a shot at a 50 to 100m exit, without (on the one hand) tripping over 35k aws bill; and on the other blowing through 50-100m of invested capital. because clearly, if the team is pitching those are the only options, its gonna make people nervous. but now it seems the mirror is pointing back at the guys and not at the VCs...

nl12y ago· 1 in thread

You are forgetting dilution.

It's pretty common for A-round investors to be diluted by 50%. http://www.bothsidesofthetable.com/2011/10/14/understanding-... shows it pretty well.

noelwelshOP12y ago

Good point. That raises the exit amount the investors seek quite substantially.

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