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Published byDorothy Thornton Modified over 9 years ago
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MENLO VENTURES 1 Menlo Ventures Overview Organized and managed nine venture funds since 1976 Raised Menlo Ventures IX, a $1.5 billion fund, in 2000 Primary focus on communications, software, and Internet related investments Three of seven partners hold MIT degrees Representative investments include UUNET, Ascend, Infoseek, Xros, Cyras, HoTMaiL and Clarify
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MENLO VENTURES 2 1st round through ßeta 2nd roundBreakeven 3rd round4 Quarters of increasing profits 4th round“To infinity… and beyond” Company Building Milestones Slide show Launch party Because you can “Go acquire a real business” Mid-80’s Late-90’s
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MENLO VENTURES 3 Early Stage Valuations – Mid-’80s “ Scientific” valuation method: Create pro-forma income statement Determine IPO date Value company at 20x trailing or 15x forward earnings Discount IPO value to present using 50-60% IRR Typical valuations were $2-3 million pre-money
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MENLO VENTURES 4 Early Stage Valuations – Today More of an art than a science Company exit values vary widely IRR calculations generally not appropriate Factors considered include people, market, product, competitive position, recent acquisition and IPOs, and recent deals funded Lead VCs look for a 15-25% ownership position
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MENLO VENTURES 5 Seed Stage Valuations (Post-Money) Source: Horsley Bridge Partners
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MENLO VENTURES 6 Early Stage Valuations (Post-Money) Source: Horsley Bridge Partners
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MENLO VENTURES 7 Seed Stage Ownership Percentage Source: Horsley Bridge Partners
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MENLO VENTURES 8 Early Stage Ownership Percentage Source: Horsley Bridge Partners
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MENLO VENTURES 9 Lessons Learned Menlo Ventures tracks all of its good and bad investment decisions Leading category for bad decisions: Valuation! 40% of deals turned down because of high valuations become winners “You can never pay too much for a great company.” (former Cisco Senior VP)
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