Private advisory · Business model & capital
The investor was offered a US$10 million business. They invested at US$96 million.
Sometimes the problem isn’t the business. It’s the way the business is designed.
A founder came to Nathan shortly before raising capital.
He asked Nathan to look over the company and make sure he hadn’t missed anything.
Nathan and the founder put the business on a whiteboard.
The underlying business was worth approximately US$10 million.
But Nathan saw that the business model was not structured in a way that maximised what a customer would want or what an investor would want to invest in.
Nathan turned the business model on its side.
The underlying capability remained, but the way the business captured and presented its value changed dramatically.
The founder presented both models to the investor:
US$10 million valuation
and
US$96 million valuation.
The investor chose the second model.
They invested at the US$96 million valuation.
US$10M
Original business model
US$96M
Investor’s chosen valuation