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)

SaaS example
- ARPU: $70 - Monthly Churn: 2% (> 50 months) - LTV: $3,500

1
CAC Outbound sales Tradeshows SEM WoM SEO

acquisition channels

Increasing LTV
- increase ARPU: upsell, enterprise accounts - decrease churn: increase utility of product, customer success

viral effect
(social networks, platforms > often advertising businesses)

Facebook
- ARPU / year: $6 - MAU: 1.15 billion - Other examples: Twitter, YouTube, Instagram, Snapchat, Wattpad

virality & network effect

- virality: sharing / WoM (e.g. communication products, social games) - network effect: additional user = additional value (e.g. Craigslist, Indiegogo, Twitter)

stuck in the middle

(most start-ups)

e.g.: news curation

- low viral co-efficient - low monetization (advertising)

3
- 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

e.g.: low-utility SaaS

e.g.: one product e-com

- low repeat purchase frequency = low LTV - competing with multi-product retailers like Amazon on customer acquisition

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

thank you
bwertz@versiononeventures.com twitter: @bwertz

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