Will chime in with another valuation metric for a company like HelloSign: attach rate [1]. In this case this concerns how much of DropBox's (much bigger) customer base can be persuaded to buy HelloSign's products due to single sales process, tight integration, etc.
DropBox has ~300k paid business accounts. HelloSign is ~$500/yr for their basic small-business (not solopreneur) plan (I believe HelloFax is separate and starts at ~$100/yr).
Assume DropBox can sell e-signing to a third of their business customers, that means HelloSign would be (relatively quickly) worth $50mm/yr in revenue to DropBox. This is before accounting for any sell-through of HelloSign to their ~11mm paid individual accounts, or any sales at all at HelloFax. (I'm sure both of these are a part of an actual investment thesis.)
Also note this assumes HelloSign comes into the deal with zero non-DBX customers, which is obviously not true. HelloSign is also doing valuable new work, so I would expect these numbers to be on the low side of expected outcomes.
Is $50mm/yr worth it? DBX currently trades ~7x revenue, so that $50mm in incremental revenue is, all things equal, worth about $350mm in market cap for DBX. So their backstop is they are buying $350mm++ in market cap for $230mm.
Would you say this is another way to explain the value of distribution channels/bolt on acquisition?
A company can have an incredible product and weak distribution (and not be very valuable per se), but the company’s value can be multiplied by a lot if the product can be folded into a very strong distribution channel (salesforce, for example).
Great thoughts on CAC, etc. certainly a fair way to value a sale.
DropBox has ~300k paid business accounts. HelloSign is ~$500/yr for their basic small-business (not solopreneur) plan (I believe HelloFax is separate and starts at ~$100/yr).
Assume DropBox can sell e-signing to a third of their business customers, that means HelloSign would be (relatively quickly) worth $50mm/yr in revenue to DropBox. This is before accounting for any sell-through of HelloSign to their ~11mm paid individual accounts, or any sales at all at HelloFax. (I'm sure both of these are a part of an actual investment thesis.)
Also note this assumes HelloSign comes into the deal with zero non-DBX customers, which is obviously not true. HelloSign is also doing valuable new work, so I would expect these numbers to be on the low side of expected outcomes.
Is $50mm/yr worth it? DBX currently trades ~7x revenue, so that $50mm in incremental revenue is, all things equal, worth about $350mm in market cap for DBX. So their backstop is they are buying $350mm++ in market cap for $230mm.
1 - https://en.wikipedia.org/wiki/Attach_rate