Removed

Revenue / ARR multiples for entry and exit. Only value exit on EBITDA if you think the company will be / the company has plans to be notably EBITDA positive at the end of your hold period. Buy on revenue sell on EBITDA can be a good way to make money if you know how to do it but it’s a unique operating skillset needed so definitely have a plan if you go that route:

Do you know if you can attach leverage to this business? That's usually why LBO framework doesn't work for companies with negative cash flow. If you know you can raise debt, then the mechanics of the LBO are the same as they are for profitable businesses. Presumably, you expect the company to generate cash flow at some point, or else you wouldn't be investing. Maybe you can monetize certain assets to pay off debt- not sure.

Doesn't sound like a very appetizing situation to invest in.

Deleted

There is a strong credit market for growing ARR companies with negative FCF, EBTIDA, and Net Income. I don't swim much in those lanes on the LMM buyout side, but know a couple folks on the credit side who have done ARR deals for UMM deals, down to LMM deals. You will be going to non-bank lenders and the underwriting will take into strong consideration ARR churn and growth, sales/marketing spend, LTV  (loan to value, think EV), and path to profitability. Part of the underwriting analysis here is to what extent you can slash sales/marketing and begin putting the contracted revenue in maintenance/service mode. From an interest perspective, sometimes you start with a PIK component out of the gate that turns into cash component when EBITDA becomes positive. Numerous ways to structure these deals