Revenue and Growth

Biotech companies with little to no revenue can still be worth billions. Consider the most prominent 2017 biotech M&A deal when Gilead bought Kite Pharma for almost $12 billion. At the time of the deal, Kite had over $600 million in accumulated deficit, but it also had a pipeline of CAR-T cell therapies, which treat cancer. This article examines how to value such pipelines. It also focuses on the risk-adjusted NPV valuation methodology, portfolios of multiple drug candidates, and how value is impacted by the characteristics of the investor or acquirer.

Convertible notes have become an increasingly popular and common method for raising capital by startups, but how well do founders truly understand the implications of going down this route?

In this article, Toptal Management Consultant Jeffrey Briggs outlines the basics of convertible note structures, and runs through the pros and cons of using them to raise money for new entrepreneurial ventures.

Traditional approaches to valuing real estate can lean towards the qualitative side, relying more on intuition over sound rationale. Linear regression analysis, however, can offer a robust model for using past transactions in an area, to provide better guidance on property valuations.

Mergers and acquisitions are headline-grabbing events that are often the pinnacle of a CEO’s career. But they also often fail to generate value, as numerous studies over the years have shown.

With over 15 years of experience doing M&A deals, Toptal Management Consultant Javier Enrile shows that the main reason for disappointing results is simple: Most people think M&A is merely an exercise of agreeing on a price for the deal. What they fail to understand is that there is a science to doing M&A that often makes the difference between a deal being successful or not.

In this article, Enrile runs through three key tactics for ensuring your company can get the most value out of an M&A transaction.

Companies, like castles, need a line of defense to repel the invaders’ advances. Economic moats, taking a cue from their watery namesakes, are long-term and sustainable competitive advantages that protect others from seizing market share. But on the flipside, are they actually just lazy, passive strategies that shun innovation?

One of the most important and challenging aspects of forecasting is handling the uncertainty inherent in examining the future. Every CEO, CFO, board member, investor, or investment committee member brings their own experience and approach to financial projections and uncertainty, influenced by different incentives. Oftentimes, comparing actual outcomes against projections underscores the need to explicitly recognize uncertainty.

Monte Carlo simulations are an extremely effective tool for handling risks and probabilities, used for everything from constructing DCF valuations, valuing call options in M&A, and discussing risks with lenders to seeking financing and guiding the allocation of VC funding for startups. This article provides a step-by-step tutorial on using Monte Carlo simulations in practice.

In the current low interest rate environment, investors have been increasingly moving towards alternative asset classes, particularly private equity which continues to attract the lion’s share of investor capital. But could a relatively unknown, niche new asset class hold the key for outsized market performance?

In this article, Toptal Management Consultant Toby Clarence-Smith uncovers the world of search fund investing, reviewing some of the key aspects of the asset class from the investor standpoint as well as running through the main benefits of putting money to work in this space.

The extent of investing in real estate for most individuals is in the bricks and mortar of their own house. For braver investors, there are a range of other options, the most notable being private real estate offerings. Similar to PE and VC funds, these structures can allow for tailored investments in skilled management teams undertaking complex projects.

In the last Super Bowl when the New England Patriots faced off against the Philadelphia Eagles, Americans bet a staggering $4.76 billion on the game. 97% of that figure was done so illegally. However, this will likely change by the time the next Super Bowl rolls around. In a hotly anticipated move on May 14, 2018, the US Supreme Court struck down the Professional and Amateur Sports Protection Act, paving the way for states to legalize sports betting.

This article covers the foundations of sports betting, including its $150 billion market size, implementation timeline, and revenue distribution. It will also examine the implications of its legalization, including increased sports engagement and popularity, ethical concerns, fresh opportunities, and its impact on fantasy sports and eSports.

With venture funding having grown more than 120% in the US in the last five years, startup founders and investors alike have grown increasingly comfortable with low margin business models. But the successes of the Amazons and Facebooks of this world often mask failure in a slew of other sectors, where the “build it and they will come” model doesn’t always work.

In this article, Toptal Management Consultant Toby Clarence-Smith brings attention back to the importance of studying a business’ long-term sustainability prospects, with a particular focus on unit economics, one of the building blocks of profitability and breakeven analysis for startups.

Of the three functional categories that drive value in business—i.e., the “hard,” the “soft,” and the “intangible”—mission statements comfortably reside in the third, alongside such concepts as brand and culture.

But despite the skepticism that is often associated with this category, and having uncovered some of the greatest gems in the corporate arena, this article argues that mission statements, when crafted and utilized effectively, are capable of driving billions of dollars in value.

Eyeballing the top-line figures of company growth is unlikely to uncover anything particular radical. To understand the trends that lead to user growth, retention, and/or engagement, statistical tools should be employed to test the underlying drivers behind performance.

With $936 billion of uninvested private equity capital inching down market, why do 46% to 80% of lower middle market sell-side transactions fail to close? The usual answer is that companies are not ready for buyers’ examination and owners can be overly optimistic or even greedy.

Business owners can do much more to put themselves in the driver’s seat. Success boils down to the following: (1) take the time and do the work to prepare for an exit transaction and (2) apply “intelligent greed” to close your best deal.

Fewer than 3% of applicants make it through Toptal Finance’s rigorous screening process. How do the best of the best become such effective financial consultants? We sat down with one of Toptal’s most on-demand financial consultants, Jeffrey Fidelman, who shared his proprietary methods for ensuring success for his clients and how he has grown his own business exponentially.

VC and PE fund structures are traditionally raised in the closed-ended manner, through limited partnerships with end dates. A less common alternative to this is an open-ended/evergreen fund, an ongoing structure that continues indefinitely. In this article we discuss the nuances of open-ended funds with a GP from B37 Ventures, who raised and operates one.

The discount rate is a critical input in any discounted cash flow valuation analysis. How does an analyst estimate a reasonable discount rate for a private company that has no publicly traded debt or equity?

This article focuses on best practices for estimation of the WACC in the context of a private company valuation. The discussion begins with an overview of the WACC, background on the components of the WACC, methods to estimate the WACC components for private companies, and an example of how to apply this framework to estimate a privately-held building materials company.