This shows that idea is not really something that VC pays for. It is always the ...

dmix · on Jan 20, 2009

Or the hype behind the idea.

With $5 million, the investors/founders believe it can be at least a $10 million dollar company in the next 5-7 years. I personally wouldn't have made that bet but at least they are charging money for their app.

nickb · on Jan 20, 2009

There's a VC out there that's happy with a 1x return in 5-7 years?! Your estimates are way, way too low. ;)

dmix · on Jan 20, 2009

Oops, I meant to write $100 million.

gravitycop · on Jan 20, 2009

With $5 million, the investors/founders believe it can be at least a $10 million dollar company in the next 5-7 years.

The $5 million investment did not buy the entire company, so the valuation might be north of $10 million right now. Did you perhaps mean $10 billion?

arockwell · on Jan 20, 2009

He probably just slipped a digit and meant $100 million. I figure that if you take VC money you believe you can build a company worth $100 million.

gravitycop · on Jan 20, 2009

I figure that if you take VC money you believe you can build a company worth $100 million.

Granted VC David Hornik in the following video is referring to revenue potential, I still think that what he says implies that VC's are looking for investments with potential exits far greater than $100 million.

http://www.youtube.com/watch?v=epdTQf0ZhPE

"Billion dollar companies? We like those, but we really prefer $100 billion companies." -David Hornik, August Capital

arockwell · on Jan 20, 2009

To clarify I meant that as a lower bound. In other words, don't take VC money unless you believe you can create a company worth at _least_ $100 million.

fallentimes · on Jan 20, 2009

If this catches on in the enterprise they could make a killing. The sales cycle is killer, but the margins are usually ridiculous.

sgupta · on Jan 20, 2009

Completely agree that the team is very important in getting funded, but so are connections.

Yammer is Founders Fund backed. 3 of the 4 partners from the Founders Fund are PayPal cofounders (Peter Thiel is the big name, but there's also Ken Howery and Luke Nosek) - Yammer's CEO David Sacks was the COO at PayPal before its acquisition.