Characteristics of the Classic Superdeal from the Investor's Perspective
Mission
-Build a highly profitable and industry-dominant market leading company.
-Go public or merge within lour to seven years at a high price^ornings (P/E) multiple.
Complete Management Team
- led by industry "superstar."
-Possess proven entrepreneurial, general management, and P&l experience in the business.
-Have leading innovator or technologies/marketing heod
-Possess complementary and compatible skills.
-Have unusual tenacity, imagination, and commitment.
-Possess reputation for high integrity.
Proprietory Product or Service
-Has significant competitive lead ond "unfair" and sustainable or defensible advantages
-Has product or service with high value-added properties resulting in early payback to user
-Has or con gain exclusive contractual or legal rights.
large, Robust, and Sustainable Market
-Will accommodate a $100 million entrant in five years
-Has sales currently at $200 million, or more, and growing at 25 + % per year.
-Has no dominant competitor now.
- Has clearly identified customers ond distribution channels.
-Possesses forgiving and rewarding economics, such as:
—Gross margins of 40% to 50%, or more.
—10 percent or more profit after tax.
—Early positive cash flow and break-even sales.
Deal Valuation and ROR
-Has "digestible" first-round capital requirements (i.e., greater than $1 million and less than $ 10 million).
-Able to return 10 limes original investment in five years at P/E of 15 times or more.
-Has possibility of additional rounds of financing at substantial markup.
-Has antidilution and IPO subscription rights and other identifiable harvest/liquidity options.