New Venture Lab: Equipping Christian Entrepreneurs

Question

In your presentation on "Building a Business From Start to Finish"  you profiled a business that you sold to a change of address company for $4 million that you had no revenue stream.  In a case such as that where the asset is primarily a technology or an intellectual property, how do you determine the value?

Answer

The buyer in question did the paper-based change of address forms for the US Postal Service.  They had just raised $15 million in venture capital to grow their business and build a web presence, but they were not experienced in web development.  We had already developed the web-based service that they needed and even though we were not very far along, when they saw what we had already built, they bought the company within three weeks of our initial pitch to them.  They paid $4 million, but the value of them having an instant web presence created close to $100 million in their company value due to the insane valuations of the day in 1999.  The price they were willing to pay had to do with the value increase for them, their cash on hand and pressure from their new investors for immediate results.