The Rise Of The Chimera: Eating Unicorns For Lunch

  • Matrix 1 - Range of Revenues: Enterprise Value vs. Revenue Multiple
  • Matrix 2 - Range of Revenues: Market Size vs. Market Penetration
  • Matrix 3 - Range of Customers: Revenues vs. Avg. Revenue per Customer Per Year
  • Market Timing: Is the market big now vs. big in the future? Being wrong on market timing is the same thing as being wrong. If the large future market never arrives into the present time, you won’t be able to execute a business beyond development work. So the question will be how long can you burn cash for until the market arrives and will investors be willing to provide you the cash runway to get there. Go get some of that “patient capital”!
  • Market Growth Rate: Increasing, stable, or declining.
  • Ability To Grow The Size Of The Market: A company that can unlock a market and make it bigger than what it is today is powerful. Think Uber for the taxi industry, Apple for creating the demand for a tablet (iPad), or any company that can solve the gap between demand and supply. If more supply is provided to a market that has more demand than the current supply (e.g. lab growing organs or cryogenically freezing organs to solve the shortage of organ to be used in transplants), the market size grows. If more demand is provided to a market that has more supply than the current demand (e.g. Uber for taxis), the market size grows.
  • Ability To Expand Into New Geographies.
  • Ability To Expand Into New Horizontal Market Opportunities.
  • High Market Penetration In Small Markets: This is the rare exception to the $10B+ SAM target metric, where with a ~$1B-$5B market you can still get to a $100M+ in revenues, but it requires that you have a 2–10% market penetration.

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Powerlist 100 VC, General Partner @ VU Venture Partners, a multi-stage venture fund, & Venture University, a trade school for venture capital and private equity

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J. Skyler Fernandes

J. Skyler Fernandes

Powerlist 100 VC, General Partner @ VU Venture Partners, a multi-stage venture fund, & Venture University, a trade school for venture capital and private equity

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