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The only 2 ways to build a
$100 million business
Boris Wertz | August 2013
Why $100 million?
“VC fundable”
(but you can a build great company
without VC)
some VC math
-  $20 million seed fund
-  return target 3-4x = $80 million
-  5% stake at exit > $1.6 billion in exit
value needed on 20-25 investments
LTV > CAC
(ideally 4-5x at scale)
high LTV / user
(SaaS, e-commerce
> transactional businesses)
1
SaaS example
-  ARPU: $70
-  Monthly Churn: 2% (> 50 months)
-  LTV: $3,500
1
1
CAC
acquisition channels
WoM
SEO
SEM
Tradeshows
Outbound sales
Increasing LTV
-  increase ARPU: upsell, enterprise
accounts
-  decrease churn: increase utility of
product, customer success
1
viral effect
(social networks, platforms
> often advertising businesses)
2
Facebook
-  ARPU / year: $6
-  MAU: 1.15 billion
-  Other examples: Twitter, YouTube,
Instagram, Snapchat, Wattpad
2
virality & network effect
-  virality: sharing / WoM (e.g.
communication products, social games)
-  network effect: additional user = additional
value (e.g. Craigslist, Indiegogo, Twitter)
2
stuck in the middle
(most start-ups)
3
e.g.: news curation
-  low viral co-efficient
-  low monetization (advertising)
3
e.g.: low-utility SaaS
-  combination of low ARPU ($30) and high
churn (7-8%) – e.g. marketing tool for
SMB s
-  resulting LTV of around $400 too low to
use most acquisition channels
3
e.g.: one product e-com
-  low repeat purchase frequency = low
LTV
-  competing with multi-product retailers
like Amazon on customer acquisition
3
take-aways
-  $100m opportunity = “VC fundable”
-  2 models to get there: high LTV / high
CAC or low LTV / low (=zero) CAC
-  think about distribution early on
thank you
bwertz@versiononeventures.com
twitter: @bwertz
about me
•  early stage investor through Version One Ventures
•  40+ investments in consumer & enterprise co s - 6
exits (Twitter, Groupon, Google, Salesforce)
•  entrepreneur: co-founded JustBooks / AbeBooks (sold
to Amazon in 2008)
•  co-founder of startup accelerator GrowLab
•  BC Angel of the Year 2011 / Pacific E&Y Entrepreneur
Of The Year 2005
•  Masters and PhD in business administration

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The 2 ways to build a $100 million business August 2013