Our business model and margins might result

[zihadhasan019]

In an acquisition price (sale of the company) of between 3-6X trailing revenue, depending on the market circumstances, growth rates, strategic importance, etc. This is massively favorable to consulting revenue, which typically garners 1-1.5X. Put another way: An SEO consulting business sale price (assuming $5 million in trailing revenue) = $5-7.5 million An SEO self-service SaaS business sale price (assuming $5 million in trailing revenue) = $15-30 million It's no surprise that investors are far more interested in these "scalable" business models that have higher exit multipliers.


This is a big reason why you rarely ever see russia email list venture or angel capital flowing into consulting firms. The margins on a consulting business hover between 40-55%. Margins in software get closer to 80%+ and scale isn't proportionally tied to cost (in most consulting businesses, the more you want to make, the more consultants you need to hire). In our situation, a VC in the B-round would be likely to get something between 15-20% ownership in the company (depending on valuation, amount in, etc).




Let's look at a chart that helps explain why we messed up from a strategic standpoint in the introductions process: VCs Level of Interest Based on Levels of Outcome Doing the math, even at the high end of the revenue/exit numbers, the VC is making 15% x $450 million = $67.5 million. If you have a $300 million fund and invest in 20 companies, you need at least 6 and hopefully 7-8 of those to hit in that range.