About Investments & Fast Exits
Yesterday I had this guy on twitter boasting about this investment he made 7 years ago and forgot about it until now when the board called him and said they reached $10M ARR. That’s like $833K per month. And everybody commented and retweeted like “wow cool” but isn’t that a little too long for $10M ARR? I’ve read that the average lifespan for a startup is 10 years.
If we consider that it’s a SAAS product and use this source then if you have $10M ARR & 500% growth, the maximum valuation you can hope for is about $155M. Yeah sounds good and shiny and I mean I’d be infinitely happy if my company was valued at that but if you look at it objectively, 7 years seem too long.
When investing in tech startups you generally look for 10x ROI. And that is considered a good result and according to some books I’ve read, people are really willing to wait for 10 years for 10x returns.
But let’s look at this for a moment: the movie JOKER, having just $55M Budget/Investment grossed $878M this year. And it’s still in the cinemas, meaning it can go up to $1B soon. Yeah, I mean I get it, it’s not the profit yet but it’s still huge given that the product was created in just 3 years.
The budget/investment for Avengers: Endgame was $356M but it grossed about $2.8B. The production took like 4 years and something. It, of course, includes everything, from concept to post-production. The actual shooting takes the least of the time.
And yeah you might think that very few movies go out with a bang like that and that’s right but if you browse through BoxOfficeMojo a little bit, you may see that most movies are very profitable. And most importantly they don’t require 10 years to be made. The average is actually 2 years unless you’re making MadMax or Boyhood. There are always exceptions but the cool thing here is the fast exits movies provide.
Given these statistics, I wonder why VCs or Angels are not investing in movies? I mean yeah, to get these results you have to invest in Hollywood movies. They MUST be produced there and be in ENGLISH mostly. You can’t hope for these numbers even if you invest in Great Britain or Spain.
And finally, I’m not imposing anything. I’m just curious & would like to hear some thoughts on this. Isn’t 7 years really a lot of time for $10M ARR & why most investor money is not going to movie making. I’d set up a production company as soon as I get a couple of millions.
P.S. and how about the Video Game business. Call of Duty- made like $600M in 3 days of sales. It was in production for 2–3 years. I mean wtf dude?
