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• Sanity check model: % of target market penetration reasonable? Gross
margins and EBITDA margins reasonable given your business model?
• Compare public companies and acquisitions in the industry, compare gross
margins and EBITDA margins and valuation multiples (i.e. ~3x Revenues =
$150M Exit Value, ~20x EBITDA = $140M)
• VC’s look for $100M-$1B+ exits to achieve 10x-100x return multiple on capital
– Initially investing at $10M-$100M post-$ valuations
Year 1 (Actual) Year 2 (Est) Year 3 (Est) Year 4 (Est) Year 5 (Est)
Target Market 14,000,000 14,140,000 14,281,400 14,424,000 14,568,456
Total Users 47,542 180,000 450,000 850,000 1,300,000
Paying Customers, After Churn 3,450 15,500 37,000 64000 125,000
% Market Penetration 0.02% 0.11% 0.26% 0.44% 0.86%
Gross Revenue 800,000$ 4,000,000$ 12,000,000$ 25,000,000$ 50,000,000$
Net Revenue 720,000$ 3,400,000$ 10,200,000$ 21,250,000$ 42,500,000$
% Net Revenue 90% 85% 85% 85% 85%
COGS 1,070,000$ 2,900,000$ 7,700,000$ 13,750,000$ 25,500,000$
Gross Profit (350,000)$ 500,000$ 2,500,000$ 7,500,000$ 17,000,000$
Gross Margin -49% 15% 25% 35% 40%
Operating Expenses 1,500,000$ $3,000,000 4,000,000$ 6,000,000$ 10,000,000$
EBITDA (1,850,000)$ (2,500,000)$ (1,500,000)$ 1,500,000$ 7,000,000$
EBITDA Margin -257% -74% -15% 7% 16%