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

*Editor’s Note: Keep up to date on all things Valuation World Cup here!

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!

*Editor’s Note: Keep up to date on all things Valuation World Cup here!

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!

*Editor’s Note: Keep up to date on all things Valuation World Cup here!

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

Monday Evening Memo


Happy Monday!  Due to the Fourth of July weekend we are getting the C:V. MMM out a bit later than normal. Check below to see what happened last week and what you can expect this upcoming week!

Recap of Last Week: Last week we closed out the Group Stages of the Valuation World Cup!  Group C and Group D were featured.

What Lies Ahead: We have a full week of Valuation World Cup ahead!  Expect to see us finish out the tournament to coincide with the Finals this weekend!  We will also have some news upcoming about the future of the site and some planned downtime (re: vacation). Stay tuned!

Valuation World Cup – Group D Winners Revealed!

*Editor’s Note: Keep up to date on all things Valuation World Cup here!

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!

*Editor’s Note: Keep up to date on all things Valuation World Cup here!

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!

Round of the Week – SmashFly


“Total Recruitment Marketing” company SmashFly has just raised a $9M Series A led by OpenView Venture Partners. The funding will go towards accelerating growth and capitalizing on the shift in how companies acquire talent nowadays. SmashFly seems to have really exceeded their metrics with a 236% increase in sales year over year.  While they may not have a massive annual revenue base at this point (OpenView likes to invest in companies with $2-$20M in annual revenue), if we here at C:V. know anything about successful investments, SmashFly is definitely on the right path!

Name: SmashFly


Funding to Date: $9M ($9M Series A)

Deal Notables: Less on SmashFly and more on the lead investor….OpenView has a pretty unique model as far as VC firms go in that they have a specific charter as a firm (high-growth, scale-ready, B2B SaaS) but also have a dedicated group, OpenView Labs, that acts as an operational consultant to OpenView’s portfolio companies.  When a company with product-market-fit is looking to scale, we can only imagine how invaluable Labs must be in terms of providing structure and process to the company vision.  Needless to say, we are intrigued by the concept!  Learn more about Labs here!

P.S. Labs produces a weekly newsletter that is required reading here at C:V. so we highly recommend you sign up too!

Valuation World Cup: Group B – Winners Revealed!

*Editor’s Note: Keep up to date on all things Valuation World Cup here!

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.

Valuation World Cup: Group A – Winners Revealed!

Here is the first Group play results!  Keep up to date on all things Valuation World Cup here!

The first group saw three teams tightly compete for the two knockout positions and one barely show up all of group play. The key to advancing out of Group A was a given method’s ability to recognize current trends in the market and its flexibility to capture those in the valuation.

Group A – 1. Adjusting the Average and 4. Recent Transactions Move On!

a table

Game 1: Cost-to-Duplicate  0-3  Adjusting the Average
Game 2: Recent Transactions  3-2  Build Up
Game 3: Adjusting the Average  2-1  Recent Transactions
Game 4: Build-Up  2-0  Cost-to-Duplicate
Game 5: Cost-to-Duplicate  0-2  Recent Transactions
Game 6: Build-Up  2-2  Adjusting the Average

Closest Match
With two of the six matches resulting in draws, this group was reasonably balanced. The match-up between Adjusting the Average and Build Up methods was certainly the most evenly matched, with both attempting to quantify intrinsic qualities of companies. It’s hard to say which method is better, since they both rely on subjective opinions of the companies to derive a hard numeric value.

Since this match-up failed to decide who would advance, it came down to their respective matches against Recent Transactions, the eventual group runner-up. Adjusting the Average matched the Recent Transactions in terms of relying on current market conditions to establish a base value. The Build Up method, despite its similar structure, had little flexibility for changes in market conditions without adjusting each block used to build a valuation.

Biggest Blow Out
Cost-to-Duplicate against Adjusting the Average
looked a little like the Swiss taking on the French: simply outmatched from the get-go. Cost-to-Duplicate’s real struggle was that it wasn’t grounded in current market expectations, but only looked to the “qualification games” and what it took to reach group play. This can result in severe undervaluation of promising early entries entering large markets – just the type of company a VC dreams about nightly!

Memorable Moment
On the last day of group play, Adjusting the Average recognized, and perfectly accounted for, a company’s ability to go to market without another round of funding. This ensured an undiluted return late in the second half as an equalizer against the Build Up method, which consequently led to Recent Transactions stealing the final advancing spot!