Tuesday, September 30, 2008
Why cannot our Government trust in the power of entrepreneurship? Fundamental businesses and jobs are created by hard working entrepreneurs. So, shouldnt the US $700 billion bailout package also setup an innovation equity fund or small business equity fund to infuse equity capital into deserving businesses as opposed to debt? While credit takes center stage, the US Congress seems to have simply ignored the need for lowering the risk for able minded entrepreneurs to create new companies that later turn into large corporations. Now we know that this bailout package is an aimless one with no one willing to elaborate if the outcome will be successful. We at least know that innovative entrepreneurs produce enormous IP and thousands of new jobs. Write to your House Representative/Senator and demand that they believe in the power of entrepreneurship and set aside at least$20 billion toward an equity fund.
Saturday, September 13, 2008
If you want better multiples when valuing your firm, you need a larger sized firm. Studies have shown that smaller websites and web-based businesses sell for lower multiples (between 0.5 and 2 times revenues) whereas larger websites/web-based revenues sell for 3-10 times revenues. Yes, there are still some businesses that sell for as high as 9 or 10 times revenues. A security software firm sold for 9 times revenues in 2007. A game & entertainment software developer trades for 33 times revenues even in these depressing markets. Bottom line is that there is still value to be discovered and better values to be got by building the right mix of business. For start-up firms, it is better to look at a strategy of building larger businesses as your exit multiples would be a lot higher.