Round of the Week – SpotHero


For all you parking “tributes” out there, SpotHero’s $4.5M Series A round will forever put the odds in your favor.  This On-Demand parking reservation company has the potential to revolutionize the antiquated parking garage business and as frequent drivers ourselves, we love the idea!

Name: SpotHero


Funding to Date: $7.5M ($3M Seed, $4.5M Angel)

Deal Notables: SpotHero came out of Chicago’s Excelerate Labs/TechStars accelerator program and pivoted from a simple parking for Cubs games solution to the form they are today.  We love reading stories about successful accelerator graduates that originally started with a concept and then pivoted to find better product-market fit. Somewhere Eric Ries is smiling

Valuation World Cup: Group A – (Angel)

Up first is Group A: the Angel investing methods. This group features valuation techniques that can be used on companies with few, if any, metrics. Very early stage companies may be little more than an idea and two partners with big dreams. To get these startups off the ground, angels apply their own methods not found in traditional banks or private equity shops. Let’s run through the participants!

*Editor’s Note: Confused? Lost?  Head over to the Valuation World Cup Homepage for more information!

1. Adjusting the Average

Explanation and Use Case
This method relies on the angels having a pulse on the current market and doing a fair bit of due diligence. First, take the median (or mode, perhaps) of recent valuations of similar companies in the region and sector. Next, consider qualitative factors of the company (such as the competitiveness of market, the strength of the team, the quality of customers, etc.) relative to other investment opportunities. Finally, apply monetary value to these factors; relative strengths should increase the valuation, while weaknesses will decrease the valuation.

This method is particularly valuable for companies that are pre-revenue and just beyond a concept, but have all the makings of a strong company. It can certainly serve as a concrete answer to a number of intuitions.

Pros and Cons
The real advantage of this method is the flexibility. Taking a holistic approach to all areas of an early-stage company rather than a single metric is like being able to seamlessly transition from the counterattacking 4-4-1-1 formation to the possession-based 4-2-3-1. What’s more, the base value is rooted in the reality of the times.

However, this method relies pretty heavily on the subjective impressions and experiences of the angel. How much is a strong partnership worth compared to a team of seven? Does a large market potential cancel out a lack of product roadmap in terms of dollars?

A particular iteration of this method championed by Bill Payne – and is sometimes referred to as the Bill Payne Method, though he has called it the Scorecard Method – provides specifics for values of qualitative measures and has been adopted by angel groups across the country.

2. Build Up

Explanation and Use Case
Like the Average with Adjustments, the Build Up method relies on qualitative estimates of future success. Unlike the above, the Build Up method starts at $0 and values a company’s ability to mitigate market, execution and technology risks. For example, strong industry partnerships with end-users would prove demand, thus reducing the market risk. By assigning a dollar value to aspect of risk, the company can “build up” its value.

This method is simple enough to be used with any pre-revenue company. It’s especially helpful for explaining to entrepreneurs where they can increase their value.

The Pros and Cons
The strength of the Build Up method is that it gets at the heart of investing: risk vs. return. An early stage company that has addressed the big risks of business has a much higher chance of big returns.

Once again, the drawback here is simplifying complex business questions into a set dollar amount. This is one that must be groomed over time to more accurately reflect the value of mitigating risks.

The most famous user of this method is Dave Berkus, founder of Tech Coast Angels. His “Dave Berkus Method” is simple enough for any founder to follow and robust enough to capture the essence of a startup.

3. Cost-to-Duplicate

Explanation and Use Case
This method looks to the past for an estimate of present value. By adding the historical costs – hours of design and programming, research expenses, even the founders’ time – this method tries to ground the valuation in something real. The Cost-to-Duplicate method tries to address that very question: what would it take to duplicate this company?

This method is effective in cases where a company presents an exciting opportunity in high-tech, especially bio-technology, where the real value is in their research and development performed and the prospects and timing of revenue in the future are highly uncertain.

The Pros and Cons
One clear advantage of the Cost-to-Duplicate method is that, rather putting arbitrary values on a “strong team” or other qualities, the value is rooted in real dollars spent (or required) to get to this point in a company’s life.

However, this method places no value on the future of the company, where the investor will actually require returns. Spending $2M of the DoD’s money on developing and patenting the latest and greatest combat space pen does not equal a solid company. Put in futbol terms, would you look at David Beckham’s lifetime earnings to determine a salary to pay the 39-year-old next year? The opposite can also be true: fast growing consumer technologies may have huge market potential with very little developmental capital spent.

Biotechr (fictional) is raising money to continue their pursuit of a revolutionary pharmaceutical treatment for turf toe. So far, they’ve had two Ph.D.’s working for the last 9 months at a cost of $10,000 each per month. Their equipment and analytics were funded through a grant of $1.5M. Their founder was so excited by the discovery that he rushed a patent through at a cost of $70,000. Total Value:  $1.75M

4. Recent Transactions

Explanation and Use Case
The simplest method in all Group A: look to the market for the value of the startup. This can come from several sources: recent investments in the space by accredited investors, recent investments from your own angel group or region, or even past investments in the founder’s previous ventures. No nonsensical values on product roadmap quality or number of JDs on the founding team.

This valuation method is especially useful when an investor has previously invested with the founding team or is especially active in the space. Again, it does not rely on company metrics that may not yet exist.

The Pros and Cons
The strength of the recent transactions method is in its simplicity, letting others do the hard valuation work on comparable opportunities. This leads both sides of the table to feel they are getting a reasonable deal.

The flip side is that no two companies are the same. With no adjustments for all that due diligence performed, this method can significantly undervalue a strong opportunity or overvalue a clear flub.


“NeedFoodNow” A (fictional) on-demand food delivery service is looking to continue the disruption in space by raising a Series A.  They will look at prior funding rounds (SpoonRocket and Blue Apron’s), any M&A in the space, and even GrubHub’s IPO to find a comparable market value for their offering at their given stage in the company life-cycle. If the analysis of these deals provides that each company was worth $2M for their Series A, then NeedFoodNow will have their value.  Total Value: $2M

Bonus: Match to Watch

The intriguing matchup here is Recent Transaction versus Adjusting the Average. While similar in principal – what’s the current investment landscape? – Adjusting the Average takes it a step further into the unknown. Perhaps these fickle adjustments will overextend their line and leave them vulnerable to the counterattack of good ol’ transparency.

The Valuation World Cup Begins!


It is what you all have been waiting for, the Valuation World Cup is here!  You didn’t think C:V. would miss a chance to mimic a world-class tournament with our own blend of VC/Startup/Finance nerdiness did you?? (For the uninitiated, see our Term Sheet Madness/March Madness competition here)

The Plan:

Much like the World Cup we have 16 “teams” of valuation metrics divided into four Groups (A-D). We will be conducting group play over the next two weeks and then the top two teams will advance from each group for the knockout stages where a winner will be crowned!

The Criteria:

With each “team” we will be providing the following:

  • Explanation and Use Case
  • Pros and Cons
  • Example

We hope these will provide a solid foundation for understanding the concepts. We will also be providing commentary on “match highlights” and other cool tidbits along the way.

The Field:

Group A (Angel)

  1. Adjusting the Average
  2. Build Up
  3. Cost-to-duplicate (Build or Buy)
  4. Recent Transactions

See the Group A winners here!

Group B (Business)

  1. Enterprise Value/Sales
  2. Enterprise Value/EBITDA
  3. Enterprise Value/Sales Expense
  4. Discounted Cash Flow

See the Group B winners here!

Group C (Customers)

  1. Churn
  2. Enterprise Value/Lifetime Customer Value
  3. Enterprise Value/Monthly Active Users
  4. Market Share/Market Size

See the Group C winners here!

Group D (Miscellaneous)

  1. Ownership %
  2. Acquisition Value (Attach Rate)
  3. Enterprise Value/Patent
  4. Exit Multiple

See the Group D winners here!

Knockout Stages and Playoffs:

Quarterfinal 1: EV/Sales vs Recent Transactions

Quarterfinal 2: Adjusting the Average vs. EV/EBITDA

Quarterfinal 3: EV/LCV vs. Ownership %

Quarterfinal 4: EV/MAU vs. Acquisition Value (Attach Rate)

Semifinal 1: EV/LCV vs. EV/Sales

Semifinal 2: Adjusting the Average vs. Acquisition Value (Attach Rate)

C:V. VWC Final: EV/Sales vs. Acquisition Value (Attach Rate)

Get Social!

Feel free to follow along and/or tweet along with #CVWC

Monday Morning Memo


World Cup week is here! Kick it off right with a MMM!

Recap of Last Week: Last week we featured Bilal Zuberi as our VC Spotlight, SAVO won our Round of the Week, and we had an event review on Fort Point Tech Nights!

What Lies Ahead: This week we will continue with our VC spotlight, Round of the Week, and we will reveal our next competition series of posts.  Think Term Sheet Madness with a World Cup twist!

VC Spotlight of the Week – Bilal Zuberi

Bilal Zuberi is our VC spotlight this week.  He is a co-founder, a VC, a Ph.D, and an avid blogger.  Get to know him below!

Name: Bilal ZuberiBilal Zuberi

Company: Lux Capital


Bio: Bilal has a Ph.D from MIT and has had experience in strategy consulting, early stage VC, and was a co-founder of GEO2 technologies.  More about him here!

Miscellaneous/Interesting Facts: In addition to his work at Lux, Bilal is also a co-founder of Boston-based student-run VC fund,  We are big fans of Roughdraft’s model and really like the idea of students partnering with students.

Round of the Week – SAVO


Sales productivity powerhouse SAVO has won our Round of the Week with their $35M Series C raise. Proceeds from the round will be used to further develop their product suite and fuel global expansion.  We are intrigued by all the CRM-inspired tools available to Sales teams today (SFDC, Yesware, InsideSales, etc.) and think SAVO can make a serious dent in the $20B/yr CRM industry.

Name: SAVO Group


Funding to Date: $84M ($10M A, $10M B, $10M Debt, $35M C, ~$19M Unknown)

Deal Notables: While the CRM industry has only really taken off with the proliferation of ubiquitous internet access for all corporations (re:, SAVO has actually been providing sales enablement tools since 1999.  Given its atypical funding to date and long tenure since inception/initial funding (2005 according to our research), we wonder if/how the original investors have exited their investment (secondary capital?) or if they have had to let it ride…

Event Review – Fort Point Tech Night @ WeWork


*Editor’s Note: Short post due to the informal nature of event, but we hope to start covering more of these in the future!

Tonight we attended the Fort Point Tech Night hosted by WeWorkAltisource Labs and Friends of Fort Point Channel sponsored the informal networking night for Boston area entrepreneurs and tech enthusiasts.  We really enjoy attending events like these because it allows us to step out of our daily work life and meet up-and-coming entrepreneurs and enthusiasts!

The Fort Point WeWork is a really cool space, filled with Foosball, Ping Pong, kegerators, flat screen TV’s, and a lot of working space as well.  We highly recommend checking out the space if you get a chance!

VC Spotlight of the Week – Bijan Sabet

*Editor’s Note: Published a day later than expected due to travel issues here at C:V. HQ but here it is!

Spark Capital’s Bijan Sabet is our VC Spotlight for this week and while he is probably most well-known for leading Spark’s investment in Twitter, he has an even stronger history of successful investments and operating roles at startups.

Name: Bijan Sabet

Company: Spark CapitalBijan_Sabet-b


Bio: Bijan has a B.S. from Boston College (Fulton Hall represent!) and had roles in product and business development at a string of successful startups before joining Spark Capital at its inception in 2005.  Sabet has led many successful investments while at Spark, some of which can be found here!

Miscellaneous/Interesting Facts: Bijan came under some media scrutiny during the release of the Twitter book, Hatching Twitter, due to his alleged involvement in the ousting of then current CEO Jack Dorsey in favor of co-founder Ev Williams. We read the book and feel that Sabet got a bad rap for nothing. Bilton (the author) seemed to over-dramatize the firing of Dorsey to almost Hollywoodesque levels, when in reality management changes like these happen all the time in the startup world.  But, at the end of the day, Bijan helped guide the company along to an extremely impressive return for Spark (and their LPs) which we hope quelled any of the negative media coverage.