Prosperati - Latest Comments

Re: How To Evaluate Early-Stage Web 2.0 Companies

alhasawi — Fri, 02 Oct 2009 06:15:01 -0000

You cant project. All you need to do after you have done your research is to enter the market , bootstrap , don't invite investors yet . Try to make profit , sell sell sell . Then you can tell if you are doing well or not !

Re: What Do You Do After You’ve Drank Your Kool-Aid?

entrepreneur01 — Mon, 24 Aug 2009 06:41:38 -0000

I am one such lonely start-up owner (A web portal service). Since i started after 9 years of successful career, all my peers and friends (even childhood) are far too busy in what they are doing. 90% of my family members do not what Internet is. The people whom i trust and respect do not have vision or very well understanding of what am i doing. In such a situation I am really struggling to form "board of accountability". Now i am trying to network with "unknown" entrepreneurs at various forums to see if i can find any such person....

I understand the above article does make sense, but i am trying to find a way to get there... any suggestions are most welcome.....

Re: Hello world!

susan — Thu, 06 Aug 2009 04:54:25 -0000

Easy for you to say.
Say hi to HuiChe for me. Heard you have three daughters now, congrats bro!

Re: How To Evaluate Early-Stage Web 2.0 Companies

colinwong — Mon, 20 Jul 2009 00:14:56 -0000

Hi Callaway,

Bebo would not be a good comparison because it is not an "early-stage" company. The article I wrote pertained more to new Web 2.0 companies who are just starting out. The issue with new startups is that often you don't have a proven product or a proven market base. In this scenario, it is difficult to apply any type of traditional evaluation model.

In the case of Bebo, the dynamics have changed. Bebo has a large user base (2.5M uniques). It would also have growth rates. It would know its user acquisition cost. It would also understand its revenue model (house ads, remnant ads etc.) And lastly, there would also be comps i.e. what the last investor paid for Facebook and so forth. Again, even in this case, its a very subjective play. Facebook for example faces a lower valuation today (from the $15B that Microsoft gave it) despite that its grown faster, bigger and has totally dominated the social network space.

Unfortunately its very difficult to answer your question in any meaningful way because it really is unique to each deal. How many months to justify a valuation? I don't know. I'd assume that growth rates are just as important as the target install base. And after that, what is the acquisition cost required to maintain the growth? As you've mentioned, a super bowl commercial is great but its not sustainable.

Re: How To Evaluate Early-Stage Web 2.0 Companies

callaway — Fri, 17 Jul 2009 22:30:33 -0000

Can you please go into more detail regarding market validation and iterations? I am a bit confused.

It seems like you first need to determine your value proposition, and then determine the iterations it will take to get market validation to support that valuation (as well as the length of each iteration).

Here is an example: Bebo was purchased for 850M in May 2008 when they had 2.5M monthly unique visitors (according to Compete.com). Let’s assume for this example the target company will be very similar to Bebo, will not generate any revenue, and is looking to build a monthly unique visitor base of 2.5M (as measured by Compete.com). Let’s also assume Bebo did not generate any revenue either, and that AOL was only buying them for their user base. The target company wants to show investors that they will be worth $850M once they have a consistent monthly unique visitor base of 2.5M.

If unique visitors are your basis in determining value then you are saying you need to determine how long you have to sustain that number of unique visitors? So for this example would the iteration period be one month (since it is monthly unique visitors)? Presumably you could not command a value of 850M the first month you hit 2.5M monthly unique visitors (because if that were the case you could spend $5M on a super bowl commercial and get 2.5M unique visitors that one month of promotion and potentially zero the following month). So it seems you are saying you need repeat performance before your value is validated. Correct?

In your experience, how many months does a social networking/web 2.0 type of website need to justify a valuation which is based on data derived from recent transactions in the marketplace?

Thanks

Re: How To Evaluate Early-Stage Web 2.0 Companies

colinwong — Sat, 11 Jul 2009 06:00:09 -0000

Assuming that your brand is strong (since you claim to be the largest social network of your country) you've probably had some level of market validation already. With 100K users, you'll have an idea of what your monthly revenue per unique user is. You'll also have an idea of your growth rates and should be able to project out the next 12 - 18 months.

If you are unable to get any revenue generation thus far, I'd recommend you focus in this area next as the next validation point, unless you can find an investor who is still willing to invest in growth. These investors are hard to come by these days. Hope this helps.

Re: How To Evaluate Early-Stage Web 2.0 Companies

chodhry — Wed, 08 Jul 2009 09:13:42 -0000

What do you think of a start-up where market is already there and you are just creating some value for existing users to use your site and not the others?

We are actually a largest social network of our country with around 100,000 registered users and trying to evaluate our actual worth to accept an investor as a partner and identify his fair partnership share. Still, like may other start-ups we have not had any real revenue generation from the site started but it looks too close now.

Re: What Do You Do After You’ve Drank Your Kool-Aid?

Jack — Sat, 20 Jun 2009 15:52:27 -0000

A very heartfelt and insightful article.

Great read!

Thanks.

Re: Hello world!

colinwong — Mon, 08 Jun 2009 00:04:53 -0000

Thanks Marcelo. Great tip. Keeping it consistent is definitely key and sets expectations. Am also looking forward to more tips from you ;)

Re: Hello world!

Marcelo Calbucci — Sun, 07 Jun 2009 23:27:58 -0000

This is great Colin. I'm looking forward to more entrepreneurship insights from you. My one tip is to keep it consistent. Once a week is much better than 4 times in a week and 4 weeks w/o a post.