The only 2 ways to build a $100 million business
Boris Wertz | August 2013
Why $100 million?
“VC fundable” (but you can a build great company
without VC)
some VC math - $20 million seed fund - return target 3-4x = $80 million - 5% stake at exit > $1.6 billion in exit
value needed on 20-25 investments
LTV > CAC (ideally 4-5x at scale)
high LTV / user (SaaS, e-commerce
> transactional businesses)
1
SaaS example - ARPU: $70 - Monthly Churn: 2% (> 50 months) - LTV: $3,500
1
1CAC
acquisition channels
WoM SEO
SEM
Tradeshows
Outbound sales
Increasing LTV - increase ARPU: upsell, enterprise
accounts - decrease churn: increase utility of
product, customer success
1
viral effect (social networks, platforms
> often advertising businesses)
2
Facebook - ARPU / year: $6 - MAU: 1.15 billion - Other examples: Twitter, YouTube,
Instagram, Snapchat, Wattpad
2
virality & network effect - virality: sharing / WoM (e.g.
communication products, social games) - network effect: additional user = additional
value (e.g. Craigslist, Indiegogo, Twitter)
2
stuck in the middle (most start-ups)
3
e.g.: news curation - low viral co-efficient - low monetization (advertising)
3
e.g.: low-utility SaaS - combination of low ARPU ($30) and high
churn (7-8%) – e.g. marketing tool for SMB’s
- resulting LTV of around $400 too low to use most acquisition channels
3
e.g.: one product e-com - low repeat purchase frequency = low
LTV - competing with multi-product retailers
like Amazon on customer acquisition
3
take-aways - $100m opportunity = “VC fundable” - 2 models to get there: high LTV / high
CAC or low LTV / low (=zero) CAC - think about distribution early on
about me
• early stage investor through Version One Ventures • 40+ investments in consumer & enterprise co’s - 6
exits (Twitter, Groupon, Google, Salesforce) • entrepreneur: co-founded JustBooks / AbeBooks (sold
to Amazon in 2008) • co-founder of startup accelerator GrowLab • BC Angel of the Year 2011 / Pacific E&Y Entrepreneur
Of The Year 2005 • Masters and PhD in business administration
