

M&A Ladder: Position Your Startup To Sell it For More - eladgil
http://blog.eladgil.com/2011/01/m-ladder-position-your-startup-to-sell.html

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jonmc12
Elad's articles are always insightful. I had a similar discussion recently
with a friend of mine, and here is what we came up with from our point of
view:

Layers of valuation - Level 1: Talent, Level 2: IP, Level 3: Product, Level 4:
Market Validation, Level 5: Profits, Level 6: Branding

Level 1 can be multiplied by connections to people with influence and deep
pockets. Level 2 can be multiplied by a proven, protectable technology that
speculatively can solve a very big product problem. Level 3 can be multiplied
if it addresses a very large market. Level 4 can be multiplied based on
traction - users / revenue. Level 5 can be multiplied based expected growth
rate of profits. Level 6 can be multiplied based on the businesses presence in
the industry, and/or with its customers.

For me, its useful to look at the valuation as a function of risk mitigation
based on asset class. For instance, where Elad points to 'Team Hire' and 'Team
Buy', in both cases I think risk mitigation is largely a function of the
talent reputation of the team in the eyes of the potential buyer. In this
sense (reputation-based), any valuation of talent acquisition can be viewed as
the net social capital of that team. However, this valuation basis become
irrelevant with the presence of a solid product or intellectual property.

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j_baker
I really enjoy this article. It really shows that there is more to being
acquired than creating a throwaway product just so you can be the target of
some HR acquisition.

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ericwu01
Great article Elad, great insight and perspective on the various factors to
consider when building/growing a startup.

