Build a $300 Million Pie So Everyone Can Get a Big Helping

Reading about RelateIQ’s $390 million exit to reminded me of an idea I heard many years ago: it typically takes an exit greater than $300 million for everyone to do extremely well. For RelateIQ, with their last round less than a year ago valuing them at $245 million (again, amazing to think about considering people estimated their revenues as less than $5 million), one of the drivers that likely lead to the $390 million dollar amount was that their most recent VCs wanted at least a 50% return on investment (50% would be a small target for VCs but the timeframe was super short).

Going back to the $300 million exit target so that everyone makes good money, here’s how it might break down depending on how much capital went into the business:

  • Venture capitalists own 50% – $150 million (it’s common for VCs to own the majority of the business after several rounds of financing)
  • Founders own 30% – $90 million
  • Employees own 18% – $54 million
  • Advisors and bank own 2% – $6 million

Even very early employees that might own 1% of the company would make $3 million, which is a life-changing event. Based on my limited experience, this logic of a $300 million exit being the huge target for everyone to earn good money makes sense to me.

What else? What are some other thoughts on the goal of a $300 million exit so that everyone can make good money?

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