Ep 51 Gregg Ficery — If You're Not Making Money, You're Not Worth Money — Tips from 1,000 Valuations

“If you're not making any money, you're not worth any money. I've had a company recently that had a very high opinion of their value, and they'd been around for seven years. They'd grown revenue nicely to several million, but never made any money. And they were in a dispute of sorts and wanted to justify a high value. And I'm like, look, I can't do it, especially in a litigation situation, put my reputation online to justify a number that is just unrealistic.”

“Revenue multiples are much less reliable than even EBITDA multiples. Smaller companies are just generally not as mature. They're riskier, and they deserve higher discount rates on their forecasts. For several reasons, they're just not worth the same multiples as larger public companies.”

On the tension between fundraising valuations and employee stock option pricing

“The conflict on a lot of the founder's mind is in one breath, they say that they're worth a lot and they want to be worth when they raise money, but on the other side of the coin, they want their options to be priced low. Which one do you want?”

“It feels a little bit like the early .com days, where there was pets.com. You just added .com to anything and .ai and expect to get a big valuation. There's a lot of exuberance or irrational exuberance, as Alan Greenspan used to say, in the AI world.”

On his dot-com experience at youdecide.com

“I kind of figured out in my own mind, trying to model this out for the company to say, hey, based on our pricing and the fees that we get and the percentages of click-throughs and buys. It's not just about eyeballs. It's about people buying stuff. We're probably not going to ever make any money here.”