Ep 167 Eran Eyal, the CEO and founder at Springleap, a marketplace of 180K advertising agency experts. Listen as Nathan and Eran talk about the latter’s extensive experiences as an entrepreneur and the valuation of SAAS businesses.

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3 Key Points:

The valuation of a SAAS model business may not necessarily be only evaluated on a multiplier. There are a variety of factors that can influence its value.
It can be prudent to start small as an inexperienced entrepreneur – E-Squared, Eran’s clothing and coffee based retail business was a labor of love and learning.
By building and integrating a successful marketplace into his crowdsourcing drag-and-drop business, Eran was able to increase its value.

Time Stamped Show Notes:

01:00 – Nathan’s introduction to today’s show.
01:34 – Eran joins the show.
02:20 – Eran describes his time with E-Squared, an apparel and coffee based retail business.
03:51 – E-Squared started in 2006 and was sold in 2008.
04:34 – The business had two locations and didn’t produce a massive exit. 3-4X in topline revenue.
05:31 – Eran describes his second business which relied on crowdsourcing.
09:00 – Initially the drag-and-drop crowdsourcing software wasn’t SAAS based. But it quickly switched because clients preferred paying a SAAS model.
10:11 – At its peak, the crowdsourcing business had about 37 large customers and several small ones.
10:36 – The highest MR (marginal revenue) for the crowdsourcing business was about 250K a month.
11:45 – One of Eran’s strengths is building a successful marketplace, a skill that helped him strengthen his drag-and-drop crowdsourcing business.
12:29 – Nathan and Eran discuss tying the valuation of a SAAS business to annual recurring revenue.
13:37 – Eran gives an example of why a MRR SAAS based business shouldn’t be valuated with only a multiplier.
14:35 – 7X to 10X is a good multiplier on ARR (annual recurring revenue) for a SAAS based business being sold, but it hinges on a variety of factors.
15:43 – While Nathan believes that anything other than the multiplier is only speculation, Eran believes that the speculation affects valuation significantly.
16:01 – Eran explains/defends his stance on speculation’s impact on valuation.
18:05 – Eran will be back on the show to talk more about Springleap. No Famous Five for this episode.

Resources Mentioned:

Growth Geeks – The way Nathan hires growth hackers on a per project basis for things like info graphics, blog posts, and other growth projects
Edgar – A tool Nathan uses to add pieces of content to a library and automate content distribution on media platforms.
Springleap – Eran’s business
@EranEyal – Eran’s twitter
Clarity – Eran’s Clarity
eran@springleap.com – Eran’s email
LinkedIn – Frank’s LinkedIn
Crunchbase – Springleap, Eran’s current business

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How do You Sell for $90m with NO REVENUE?! EP 167

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