Valuation World Cup: A Champion is Crowned!!


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The day we have all been waiting for is here!  Two of the early favorites have lived up to the hype and advanced to the VWC Finals!  Though the methods have taken different paths, they both remained committed to their team and investment rationale.


Group B Winner (EV/Sales) vs. Group D Winner (Acquisition Value (Attach Rate))


Acquisition Value (Attach Rate) had been a nearly unstoppable force throughout the tournament with timely scoring and full team efforts and this beginning of this game was no exception.  They got out to an early 1-0 lead due to their ability to size up the competition regardless of market factors and ensure its fit within the business model of the acquiring company.  EV/Sales took this initial deficit in stride and made an inspired push to end the 1st half but could not equalize.

When the pundits look back at the Inaugural Valuation World Cup in the history books 20 years from now, they will most remember the final as a tale of two halves.  The first half was Acquisition Value (Attach Rate) continuing its dominant pace of play that had gotten it this far. It was the hot metric, with some big name press as of late. When Mr. Andreessen tweets 14 times about something, you take note.  But you know else got a lot of press this World Cup? Tyranno-Suarez Rex.

In the second half, the Acquisition Value (Attach Rate) supporters’ deepest fears were confirmed in that the Achilles heel of the entire team was the fact that the Attach Rate was only as good as the acquiring company’s analysis and as a result could be fairly niche and hard to value at times.  This confusion was brought on by EV/Sales change in formation from a pedestrian 4-4-2-1 to an attacking 4-2-3-2 and only made worse by an own goal.  Acquisition Value (Attach Rate) was accustomed to the initial formation and when EV/Sales switched, it fell into an unrecoverable spiral similar to when a company buys a target and then it turns out to be a horrible deal for the acquirer (we see you HP-Autonomy…).

After the formation change, Acquisition Value (Attach Rate) looked as bad as Wesley Sneijder’s repeated failed attempts to cross a ball into the box in the Argentina game and it was all downhill from there.  EV/Sales caps off the comeback and with an absolute FIRECRACKER in the 85minute due to their reliance on a tried and true method.


EV/Sales 2 : 1 Acquisition Value (Attach Rate)

And a Bonus!

Golden Metric Award:

Despite a tough loss in the final, the Golden Metric was awarded to Acquisition Value (Attach Rate). They won all three games in their Wild Card Group D against some wily opposition, outscored opponents 9-1 in their first two knockout stage games, and gave the mighty EV/Sales a run for their money (get it?) in the final. As technology behemoths sit on PILES of cash and command high stock prices, we could see a buyer’s market for years to come.

Valuation World Cup: Semifinal 2 – Attach Rate advances!

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The semifinals conclude in excellent fashion!


Group A Winner (Adjusting the Average) vs. Group D Winner (Acquisition Value (Attach Rate))


The powerhouse of Acquisition Value (Attach Rate) versus the tactician’s dream of Adjusting the Average was an excellent match.  Both teams used their ability to holistically view an opportunity from the start and scored early.  The game continued to be evenly matched up until the half, but Adjusting the Average made a few unusual errors that ended up costing them the game.

Usually a bedrock of both relevant talent mixed with strong subjective game management from the coaching staff, Adjusting the Average’s head coach made a questionable defensive substitution in the 65′ (we hear this is now called “Van Gaal-ing”…) This allowed Acquisition Value (Attach Rate) to change its formation and exploit the weakened back line similar to the way they dismiss current market valuations for the proper target company and find valuable deals that fit their company’s specific ecosystem.


Adjusting the Average 1 – 3 Acquisition Value (Attach Rate)

Valuation World Cup: Semifinal 1 – To PK’s we go!

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The Semifinals begin!

It All Comes Down to Penalty “Quicks”


Group C Winner (EV/LCV) vs. Group B Winner (EV/Sales)


It’s been a physically brutal first 120’, and neither team could make any decided advances. Hmmm where have we seen that before… So here we sit, 0-0 with five quick “rounds” to go: five chances to get that valuation right or face elimination.

Company 1: “Handlr”  A Prosthetics Delivery Firm

EV/LCV quickly realizes that each customer has a low lifetime value because of low margins, and therefore will require significant growth in customer base which would be hard to achieve in the prosthetics industry. EV/Sales sees high topline figures for a young company aaand… overvalues. 1-0 EV/LCV.

Company 2: “Campr”  An Online Video Game for Pre-Teens

Both teams recognize that these developers can continue to churn out new games. EV/LCV adjusts up their current figures for that option of future value; EV/Sales used high growth comparables to reflect the potential. 2-1 EV/LCV.

Company 3: “Fishrman”  Analytics for Fishing Vessels

The tides turn as EV/Sales finds reasonable comps by using both analytic companies anchored by those in the food industry. EV/LCV, on the other hand, undervalues because early customers have been small independent fisheries whereas the future growth will come from larger corporate operations with much higher revenue coupled with lower onboarding costs of focused efforts. Even at 2-2.

Company 4: “Advr-tizr”  Digital Media Content for Millenials

Here’s where EV/Sales flexibility comes into play. This company is growing too fast to use current year revenues, so a one-year forward multiple is used. EV/LCV is up to the task as well, noting that their customer acquisition costs are decreasing, driving Advr-tizr’s LCV up in the future. Even at 3-3.

Company 5: “Smeltr”  Late-Stage Hardware Manufacturer

EV/LCV thinks they have it. They recognize the sales to academic research institutions and run with the notion that these high-value customers will continue to drive value. However, this market has already been saturated with their products. Any new sales with be fewer and further between. Their valuation sails over the crossbar! EV/Sales used late-stage comps and didn’t overweight the growth opportunities, securing their place in the final!!! EV/Sales wins 4-3.


EV/Sales 1-0 EV/LCV PK’s (4-3).

Valuation World Cup: Quarterfinal 4 – MAU Goes Down!

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Day two of the Quarterfinals continues!


Group C Runner Up (EV/MAU) vs. Group D Winner (Acquisition Value (Attach Rate))


The potential to be a Jekyll and Hyde team that has plagued EV/MAU all through qualifying finally reared its ugly head in the matchup against Acquisition Value (Attach Rate).  EV/MAU were simply outclassed on all fronts by Acquisition Value (Attach Rate)’s ability to holistically value an opportunity.  EV/MAU demonstrated strong user growth in the opening minutes but could not sustain the traction and growth needed to compete with the stronger side that was Acquisition Value (Attach Rate).  The game ended in a route similar to Germany’s embarrassment of Brazil in Belo Horizonte today…


Acquisition Value (Attach Rate) 6 : 0 EV/MAU


Valuation World Cup: Quarterfinal 3 – The Customer continues to be right!

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Day two of the Quarterfinals begins!


Group C Winner (EV/LCV) vs. Group D Runner Up (Ownership %)


Ownership % arrived ready to play and given its simplicity it was doing pretty well against the EV/LCV balanced attack.  It wasn’t until a key sending off against Ownership % in the 50th minute gave EV/LCV the ability to reassess their game plan and really push the pace.  Much like how Croatia was able to take care of Cameroon after a red card in Group play, EV/LCV was able to properly gauge their customer demographic and as a result cruised to the victory in the end.


EV/LCV 3 : 0 Ownership %

Valuation World Cup: Quarterfinal 2 – Financial Powerhouse Upset!

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Knockout round play continues!


Group A Winner (Adjusting the Average) vs. Group B Runner Up (EV/EBITDA)


While superpowers march headfirst into one another in the World Cup, here at C:V in the Valuation World Cup we love an underdog. Adjusting the Average pulled out to an early 1-0 lead. After all, they were our group stage Angel winner and are situated nicely for pre-revenue, let alone pre-earnings, companies. Late in the second half, early favorite EV/EBITDA finally clicked and looked to have that late-round prowess, but never could find an equalizer. That push left little doubt that, had this game gone into extra time (or gone public), they would have moved forward… but too little, too late for this competition. This matchup draws comparison to Germany’s parked bus after a 13’ goal against the French. Plenty of Benzem-ian efforts for EV/EBITDA, but like him, they will be watching the semis from their couches.


EV/EBITDA 0-1 Adjusting the Average

Valuation World Cup: Quarterfinal 1 – EV/Sales Cruises to Victory!

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win or go home

And so begins the knockout stage!


Group B Winner (EV/Sales) vs. Group A Runner Up (Recent Transactions)


Unlike the World Cup’s Quarterfinals, each of which were decided by a goal or less, the Valuation World Cup features a runaway game. EV/Sales and Recent Transactions looked evenly matched through the first 30’, as both are useful for very early stage companies. Then EV/Sales started piling it on, as both rely on comparables, but EV/Sales calculates value based on that company’s expected performance, not based on others’ past successes. By tying the valuation to revenue goals, you can track the increase in value with the company growth. A bit like Sneijder and co. providing a late push against El Tri, EV/Sales proved to be the fitter squad throughout.


EV/Sales 3-0 Recent Transactions

Valuation World Cup – Group D Winners Revealed!

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Group D – The BEST of the REST collide!

Game 1: Ownership % 1-3 Acquisition Value (Attach Rate)
Game 2:  EV/Patent 1-1 Exit Multiple
Game 3: Ownership % 2-2 EV/Patent
Game 4: Acquisition Value (Attach Rate) 2-0 EV/Patent
Game 5: Exit Multiple 1-2 Ownership %
Game 6: Acquisition Value (Attach Rate) 4-2 Exit Multiple


Closest Match
EV/Patent and Exit Multiple and their commitment to simplicity really did them in this game in that neither could take the upper hand.  EV/Patent was able to get an early goal, but much like its name, it was a bit of a one-trick pony in that it didn’t have much else to offer. Think Drogba on Ivory Coast but sans the victory in the end…

Exit Multiple was able to get an equalizer but could not find the game winner as it was too rooted in its single-minded focus of investor return at exit that it could not keep its mind on the game at hand.  Think the first 55 minutes of the Netherlands Australia game

Biggest Blow Out
Although the score was 4-2, Acquisition Value (Attach Rate)’s sheer dominance of Exit Multiple did not show through on the score line.  Exit Multiple was completely outclassed at all stages and were only able to get on the board with a questionable penalty given and then a stoppage time garbage goal.  Had Exit Multiple’s keeper not put on a Tim Howardian performance, the score would have been much worse.  Attach rate won the game on their ability to accurately depict true value for their shareholders while exit multiple got lost in the end game and could barely find the field as a result.

Memorable Moment
Less of a moment, and more of the entire group round performance by Acquisition Value (Attach Rate).  They look exactly like the early tournament favorite that so many have predicted and are peaking at exactly the right time.

Valuation World Cup – Group C Winners Revealed!

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Group C – The Customer is ALWAYS right

EV/LCV and EV/MAU advance!  Each team had their struggles as the group as a whole was fairly well-balanced.  Full results below!

Game 1: Churn 1-1 EV/LCV
Game 2: EV/MAU 2-0 Market Size/Share
Game 3: Churn 1-1 EV/MAU
Game 4: EV/LCV 2-0 Market Size/Share
Game 5: EV/LCV 4-1 EV/MAU
Game 6: Market Size/Share 3-2 Churn

Group C


Closest Match
Churn and EV/LCV played to a spirited draw in the opening game of Group C.  Both teams had their chances, but in the end neither could come away victorious.  Much like how it struggles to be a standalone metric when valuing a company, Churn could not muster enough power to win the game alone. Similarly, EV/LCV could not overtake Churn because of its dependence on other metrics for a strong valuation with one of the most important ones being, you guessed it, Churn.

Biggest Blow Out
EV/LCV really took it to EV/MAU in what became the battle for 1st place.  EV/MAU lived up to their Jekyll and Hyde mantra in that some games they looked unbeatable, and others they seemed unworthy of having qualified.  This game was the latter.  EV/MAU looked completely out of sorts and EV/LCV had clearly built on its draw against Churn and really utilized their entire starting XI to full capacity and as result coasted to a convincing victory.

Memorable Moment
With both teams already eliminated from advancing, Market Share/Market Size showed great resolve in coming from down 2-1 to defeat Churn 3-2. They were able to make a 2nd half adjustment to their TAM and find the appropriate market share needed which gave their investors full confidence in the management team to invest with a capped liquidation preference rather than a fully participating one and this newfound freedom propelled them to the win!

Valuation World Cup: Group B – Winners Revealed!

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Group B – Major Upset, Major Metrics

And the first powerhouse is out! The Group of Death was too much for the Discounted Cash Flow method. But with the seeming favorite out, how did the other metrics play out?

EV/Sales and EV/EBITDA advance!

group b

Game 1: Enterprise Value/Sales 5-1  Discounted Cash Flow
Game 2: Enterprise Value/EBITDA  3-2  Enterprise Value/Sales Expense
Game 3: Enterprise Value/Sales Expense  2-0  Discounted Cash Flow
Game 4: Enterprise Value/EBITDA  2-2  Enterprise Value/Sales
Game 5: Discounted Cash Flow  0-3  Enterprise Value/EBITDA
Game 6: Enterprise Value/Sales  3-1  Enterprise Value/Sales Expense

Closest Match
With only one draw in the group, it’s evident that EV/Sales and EV/EBITDA are contenders at the top of their games. Both have the strength to go deep in the tournament… perhaps looking reminiscent of Brazil and Mexico in that other World Cup, especially if El Tri can keep getting performances like that out of Ochoa! But we digress. Let’s look at these metrics’ respective advantages:

For the EV/Sales multiple, it’s about simplicity. You can approach a company with negative cash flows and still capture the majority of the growth potential as an investor. It’s also much easier to project revenue than revenue and a full cost structure. Fewer variables to get wrong means a clearer picture of expected value. It’s like having one superstar who you can count on for at least a goal a game (re: Neymar, Messi).

EV/EBITDA takes a more complete approach to valuation, considering the cost of doing business which can vary significantly between even similar business models. It also doesn’t get bogged down in non-cash expenses or potential tax breaks, like the DCF or even the disqualified EV/Earnings. It’s like a long-lost love child of EV/Sales and EV/Sales Expense, à la Czechoslovakia, except this combo’s still kicking!

Biggest Blow Out
Discounted Cash Flow took an early walloping from EV/Sales, and was never the same. In our Group B preview, we compared the complexity of the DCF model to the Spanish tiki-taka futbol… little did we realize we had made two bold predictions in one! Realistically, the DCF was simply out of its element. Just think – precision passing and team-focused play led the Spurs to an NBA Championship but came up short for Spain in the World Cup.1 In this bracket, as in the Spaniard’s loss, simplicity is beautiful:

Memorable Moment
EV/Sales Expense thought their claim as the only measure that took into account the cost-per-sale metric might be defensible. But during their head-to-head with EV/EBITDA they looked about as lost as Mr. Yoshida trying to defend James Rodríguez

1Spain seems to be one of the only World Cup countries not represented on the Spurs’ 15-man roster: Argentina, Australia (twice), Brazil, France (twice), Italy, and the United States.