@OrlandoBravoTB just dropped a masterclass on Software Private Equity
AI. Valuations. Exits.
Notes from his latest interview ⬇️
Valuations & the Dot-Com Era
AI valuations today are a bubble:
A $50M ARR company cannot be worth $10B.
To double investors’ money, it must produce $1B in free cash flow.
Even if the product is right, even if the market's right, that's a tall order.
Difference vs Dot-Com:.
Now you have some really big companies with big healthy balance sheets financing this activity, which was different than what happened roughly 25 years ago.
Exits and Multiples
Exits are healthy. Valuations are lower.
Face the reality that these software companies are not selling in the private market for 25x EBITDA.
Selling closer to 15x EBITDA.
You better add enough value, so that you can still generate the liquidity and the returns to your investors while selling your companies.
IPO market is great and wide open for the elite firms and valuations are a lot more reasonable.