33 Times Earnings = Your 2.0 Business Value

NewCo Value
Originally uploaded by benbarren.

Anyone who experienced pain or 9-5 boredom in 2002-4 (it seems so long ago now) should (can) apply the Calacanis' earnings-ism to their 2.0 startup. We do. If you have the team, technology, eyeballs, sector market leadership, and rapidly growing revenue, the 'income insurance' for your 2.0 biz, is of course earnings. I havent looked recently but I know that Internet companies acquired over the past few years (if you take out the Skypes and Flickrs) you can get 35-40 times earnings. If it's more production, consulting, client orientated you might get 10-20 times earnings (vs 5-10 times for a typical offline ad agency on a low multiple) The average earnings multiple of these public, large cap, high revenue base, low growth companies, if you take the loss making ones out, is 33 times earnings (i havent taken into account size of profits just calculated an average multiple from InternetStock Blog article on this topic) I know im building a business with targeted earnings in mind within 2 years because then the value of the business is indisputable (it also funds survival, expansion and lifestyle) : Versus an eyeballs/ad only play there needs to be amazing technology or a vast scale of sites, ads, page views, users etc. Valuation is always an interesting conversation once you move past companies that buy teams/technology/eyeballs and are less interested in the financials of the business (of course neither is right or wrong etc) So I'll work on 33 times. Today anyway.