Believe the internet. Most really do fail, and return little or nothing to restricted share- or option-holders, who couldn’t sell early as part of other funding deals.
How does all the value just evaporate?
The problem is that the company is trying to grow, and will increase it’s ARR by an order of magnitude in pursuit of that growth. If they don’t actually find a sustainable market, that won’t justify an IPO or forward-looking exit. And then, when the valuation starts to fall, it becomes VERY unattractive to any buyer, who thinks “what am I really getting for this, and why not just wait until it’s zero and pick up the remains from the bankruptcy court”?
Gah, I thought ARR was Annual Run Rate (Burn Rate), not Revenue. I meant to say they’ll use their newfound capital much faster than they increase revenue (which they should! that’s the whole point of seeking funding). And then, for most, the revenue won’t actually increase enough and they go bankrupt.
My main point was that when it turns, it turns completely. Every funding source is projecting the future, not looking at the current situation. A negative direction is zero-value.
Believe the internet. Most really do fail, and return little or nothing to restricted share- or option-holders, who couldn’t sell early as part of other funding deals.
The problem is that the company is trying to grow, and will increase it’s ARR by an order of magnitude in pursuit of that growth. If they don’t actually find a sustainable market, that won’t justify an IPO or forward-looking exit. And then, when the valuation starts to fall, it becomes VERY unattractive to any buyer, who thinks “what am I really getting for this, and why not just wait until it’s zero and pick up the remains from the bankruptcy court”?
I got confused reading this a few times, because increasing your annual recurring revenue by an order of magnitude IS growth (most of the time).
I think this is supposed to say something like increasing burn rate by an order of magnitude.
Gah, I thought ARR was Annual Run Rate (Burn Rate), not Revenue. I meant to say they’ll use their newfound capital much faster than they increase revenue (which they should! that’s the whole point of seeking funding). And then, for most, the revenue won’t actually increase enough and they go bankrupt.
My main point was that when it turns, it turns completely. Every funding source is projecting the future, not looking at the current situation. A negative direction is zero-value.