Story
Shervin Pishevar buys the company with a $2M number on a napkin
At a Facebook-apps conference, Shervin Pishevar wrote an acquisition number on a napkin and slid it over. Ali saw $2 million for a 9-month-old company and said yes instantly.
“So he writes a number on a napkin, turns it over, slides it to us. We look at it and we immediately say, okay, let's do this deal. Uh, so it was a $2 million number on the napkin and we'd started the company sort of 9 months ago.”
Framework
The roll-up: raise a big check, buy the top players, combine for more value
Shervin Pishevar's strategy was a roll-up: he raised $15M from VCs, then bought the top 5 players in the Facebook-apps space, combining companies that cost ~$10M to create $50–100M of value.
“So what Shervin was doing was a strategy that's called roll-up. So you get somebody to back you and give you a big check. In this case, he'd gotten venture capitalists to give him $15 million. He was going to use that $15 million to buy up the top 5 players in the space, combine them all together with a goal of, you know, that costs $10 million but creates $50 million or $100 million of value.”
Steal thisRoll up the top players in a fragmented space: combined, they're worth far more than the sum bought separately.
Story
A $2M number on a napkin, 9 months in, and they said yes instantly
At a conference, investor Shervin Pishevar wrote a number on a napkin and slid it over. It was $2 million for a company they'd started 9 months earlier — they accepted immediately.
“So he writes a number on a napkin, turns it over, slides it to us. We look at it and we immediately say, okay, let's do this deal. So it was a $2 million number on the napkin and we'd started the company sort of 9 months ago.”
Framework
The roll-up: combine the top players to manufacture value
Shervin's playbook was a roll-up: raise a big check ($15M from a VC), buy the top 5 players in a space, and combine them so the $10M spent creates $50M-$100M of combined value.
“So you get somebody to back you and give you a big check. In this case, he'd gotten a venture capitalist to give him $15 million. He's going to use that $15 million to buy up the top 5 players in the space, combine them all together with a goal of, you know, that costs $10 million but creates $50 million or $100 million of value.”
Steal thisRoll up the top players in a fragmented space so the combined entity is worth far more than the sum of the acquisitions.