MemberOctober 27, 2020 at 1:16 pm
AltoIRA (link below) is a fintech doing a Crowd SAFE offering on Republic (closing in <48 hrs from this writing btw). No matter, I’m unlikely to invest as there are at least 2 others doing the ‘IRAs for alternative investments’ thing; the model and likely adoption rate gives me pause. I also think that traditional providers will get the memo any day now. Regardless…
I have not combed through the docs in detail, but I’m struck by the relatively high cap ($30M) and small discount (10%). I can see how these might be related (only 10% but on a higher potential exit #). Am I thinking about this correctly?
Also, these seem exceptional.. a $30M target is pretty aggressive based on most deals I see on the CF platforms (tho I limit my focus to certain areas). Likewise, 10% is underwhelming. Are there any data aggregator sites that track the averages across platforms for stuff like this?
As for this particular offering, assuming I’m interpreting this correctly, do you suppose that they believe their particular corner of the finance industry will get them to an extra-big exit (and that is why they priced the offering this way)?
- This discussion was modified 1 year, 7 months ago by Jason.
AdministratorNovember 3, 2020 at 5:00 pm
Sorry I didn’t get a chance to respond to this before the campaign closed.
Personally, I focus more on startups in the sub-$20M valuation range as my sweet spot, so I honestly didn’t give this one too close of a look.
Looks like the discussion is closed now so I can’t read the Q&A, but I’d really need to see impressive growth and revenue numbers for 2020 that justify the $30M valuation cap. With most recent fiscal year revenues of $78,574, a valuation of $30M is crazy high in my opinion (that’s a revenue multiple of 381! Revenue multiples for SaaS startups tend to be in the 5-10X range, maybe 20X on the high end for the hottest deals), but there could be other factors at play (having a very experienced team with prior exits, key investors, that type of thing can also get higher valuations), and granted, there are plenty of counter-examples of pre-revenue companies raising at high valuations in the $10-20M+ range.
Note that technically “valuation cap” of a SAFE isn’t the current valuation – it’s just the cap at which it will convert (you’ll get the better deal of either the valuation cap or the discount rate). That being said, investing in a valuation cap that is way higher than an anticipated future financing round means you’ll essentially be taking all the risk without much benefit by investing early, so you want to find valuation caps that are aligned with reality of what they could be worth today.
Competition can be a good thing (i.e. if nothing else, it can hint at validation of a promising business opportunity that others also realize), so the main question I tend to lean on in that instance is “why this team?” and “what are their key differentiators?”.
It doesn’t always have to be some super-secret tech or IP that leads to a unique advantage – it could be first-to-market, having an impressive brand, or many other things. That being said, I’m personally less adept at noticing those things (vs. a unique idea and/or technology).
All this being said, while I decided not to invest myself, I love the AltoIRA team and product, and they could benefit from an overall rising tide market, especially with the recent SEC changes being adopted this past Monday.
My 2 cents – hope this helps.
- This reply was modified 1 year, 6 months ago by Brian.
AdministratorNovember 3, 2020 at 5:04 pm
In terms of “data aggregator sites” – I think the best source of this data today is on Kingscrowd, using their Ratings platform (and soon to be releasing the industry-wide analytics, which will help to more easily look at these types of trends across offerings).
Click on “Ratings“, then you can slice and dice data for 2300+ Reg CF and Reg A+ raises. They make it very easy to filter and sort based on security type (e.g. SAFE) and valuation/cap, so then you can get an idea if the terms of the deal are aligned with the market averages.
Full disclosure: I’m an investor in Kingscrowd (through an earlier equity crowdfunding round) and currently helping them out part-time as a software developer building their ratings and analytics platform.
AdministratorNovember 3, 2020 at 5:11 pm
Here’s a great early-stage reference I refer to often from Jason Calacanis, FYI. This isn’t necessarily applicable here, but thought it’s useful for pre-revenue valuation: