Josh Peleg - $172M of App Building Advice in 50 Minutes

Okay.

So let's talk about nine figures.

Why are we talking about nine figures?

We're talking about nine figures because I think for a lot of founders who are trying to go the distance, who are in this for the long game, they're really thinking about how do I achieve this outsized return, this kind of exit that gets written about in the papers above the smaller stuff that kind of goes under the wraps.

And I think there's a big difference in building your app and your app business for the long term, for the nine figures, versus building it for the slightly shorter to midterm for the kind of seven, eight figure exits.

And I think there's a lot of information that doesn't quite add up online.

And I really wanted to compile it into one place for the founders who are thinking about that long-term strategy.

To break this down into the numbers a little bit, in order to hit nine figures, you need to kind of hit a few different criteria.

Either you need to have like a really strong growth trajectory with profitability in that, And when I say the words profitability, we're talking about 30, 40, 50% EBITDA margin, something really, really strong.

And with this, people will start to value you based on your future potential.

And that's where you get the 6x revenue run rate.

For those who don't know, run rate means they're valuing you on revenue that will be earned in the future.

The other side of this is if you're essentially a bit of a slower growth business and your profitability margins are slightly weaker, then valuers and acquirers are going to start to value you based on your past performance.

So when you see the word LTM, that's referring to the last 12 months of revenue.

So if we can kind of compile that into a nice takeaway, it's basically what story are you selling about your app and what are people buying? Is it the growth story? Are you selling the future of your app? Or were the best days of your app in the past? And are you selling...

the previous story instead.

It just comes down to growth rate, basically, because like a 6x multiple on revenue run rate is like you take your current month and then you multiply it by 12.

Or do you take your current month and then project out, like look at the growth and then project out like, oh, we're going to keep making more money each month compared to LTM, which is just you look at the last 12 months.

I mean, generally you don't want to take a month because months can be really sporadic.

I mean, if we think about a fitness app that's popping off in January, December, you know, we don't want to be taking that single month and extrapolating it for the next 12 months because it's not going to be accurate.

But some people will then take maybe a quarter or some people maybe take six months and then extrapolate that.

It really depends on what the stability is of the app.

Is there like a very constant level that the app performs at that is actually quite fair to predict on? Or is the revenue or downloads very choppy, very up and down? Because you don't want to be extrapolating on something that's choppy.

And so I think if we take those numbers from the previous slide and think

about what are these two quite different paths to it, you know, $100 million plus in valuation.