Missed out on an Amazing VC Deal... Let's talk :(
Hello Everyone,
Hope you're well during these tough times.
I'll keep this short for all my busy folks.
I have been in the CRE Sales/Asset Management space since College and started VC Investing a few years prior. (at the VERY VERY micro level) Simply because VC returns are amazing.
The Story about the VC Investment:
about 4Yrs ago I met a family that grew up not-rich. They worked hard via many blue-collar jobs (Retail service, Truck driving, leasing, etc) for 13+ yrs.
When we spoke they talked about how they are scrapping up $1m to start a franchise restaurant chain company. We were friends and so we talks a great ton about it and gave them insights over the months. They asked me if they wanted to provide capital because they need it to put the $1m as a Down payment. I chickened out for the associated risks of that industry.
Fast forward 4yrs. They have turned their $1m investment into a $100m company .
AMAZING... I was insanely bummed out for weeks.
FYI: 3.5-4yrs ago, $100K was equal to about 9.5% of my total net worth
The Potentials of the VC Investment.
Invest $100,000
Equity stake = 10%
4Yrs later... Company was doing about $9M - $10M in NOI.
THUS, at an average of 11X - 12X EBIDA multiple, the firm would be worth $100M.
Thus, making it a 10,000% ROI over 4yrs for me....
I am truly upset!!! at my myself.
They wanted $100K - $250K from me for a 10% - 20% stake in the company.
If I listened and invested just $100K for a 10% stake. I would have walked away with $10M today..
Seriously.
What did you invest in instead?
I instead invested in a few smaller companies.
So far they're doing well.
a) I invested into a power washing company
Added in $25k for a 10% stake
As of now the firm does about $604K per Yr in profit. Valuation is about $4.23M
My stake is worth about $423K
b) A car detailing company in New Jersey
Added in about $20K for a 10% stake.
As of now, the company does about $810K in profit per year. Valuation is about $4.9M
My stake is about $490K
I was a seed investor. I met the entrepreneurs (of the companies above) when they were just starting out the ventures.
Sounds like you're still doing pretty well man. How did you get the opportunity to even meet these entrepreneurs?
Don’t mean to rain on your parade, but those valuations are off. No one is paying 6-7x for Bob’s Corner Washing Business. Such shitcos regularly trade for 3-4x tops.
It's likely that with you at the helm they wouldn't have been as successful so you didn't really miss out on anything
Plus don't forget dilution
Do explain your statement.
So you're saying.. my involvement would have made it worse for them?
Well you didn't have the vision to help them 100x why you think you could have helped them do 101x?
Anyway just helping you cope.
Its like people who stress about not buying BTC at $5 but would have sold it at $7
Just curious, why are you using a 11 - 12 x multiple? Is that the standard in this type of franchise industry? Seems a bit much
The range varies. So I'm assuming a average multiple.
Many $50m businesses in my area trade at 7X - 8X
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