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Comment by dhuck | Hacker News Reader

I bristled at this: "A business that needs no more than $1-$2 million in financing to become a $25-$50 million (exit value) company, simply by executing the core business plan."

That is an insane requirement for return. I'm not sure how that's even possible - or if any company has even managed to do that. Someone prove me wrong?

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Broken thread, see http://news.ycombinator.com/item?id=324853

$25 million is a lot of money, but so is $1 million in funding. Most web 2.0 companies need no more than $100k or so to get to profitability, and can easily exit at $2.5 million. Same ratio, but it sounds a lot more achievable. So the only real issue is scale.

Bear in he's talking about enterprise software (i.e. support contracts, custom software, consultants). When you start doing custom work and get paid by the hour your revenue goes through the roof. So you can get to a $25 million valuation pretty easily, if you're willing to be a software/consultancy hybrid.

This is not the sort of situation I would invest in. If you are billing by the hour, it is unlikely to be a leveraged business, and the investment return is unlikely to be as comfortable. Additionally, due to the smaller size, there would have to be many, many investments; it's hard to find many of very good quality.

That tends to be the cash-cow that enterprise software vendors grow into (SAP, Oracle, et al), though I agree that it's not the place you want to target from the get-go. It probably does have some seductiveness if you're boot-strapping.

It's very hard to sell to large sized enterprise without supplying custom work. You're right that the custom work isn't leveraged, but it's a prerequisite to get your product installed into their (often silly) IT structure.

This only requires a portion of your engineering and support resources, and there is no reason you could not establish strong ties to an existing consulting organization to be the "consulting services" arm of your company.

I'm sure plenty have managed to it. Iirc, Omnisio had less funding than that and sold for $15 million to Google.

We're trying.

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