1Mby1M Virtual Accelerator Investor Forum: With Jason Cahill of McCune Capital (Part 3)

Sramana Mitra: Are you chasing Unicorns?

Jason Cahill: Yes and no. I don’t get upset when my companies get marked up at billion dollars. If I invest in a company in $5 million, they get to acquire at $50 million, I can live that. That’s the tax. I have done very well at being efficient with capital. I love for all my companies to become unicorns but if they sell for $500 million, I think I’ll buy all. Everybody is happy.

Sramana Mitra: So what is the low threshold? Comment on what I said on the Bootstrapping to Exit article about the smaller opportunities. There is a class of investors emerging who are paying attention to the smaller opportunities that’s acknowledging the fact that most exits in the industry happen at the sub-$50 million price point. Are those of interest to you or are they too small?

Jason Cahill: Yes, they are a little bit too small. When I’m doing my diligence, I’m going to build to a model. The first cut would be problems, solution, market, and team. The market can comment whether or not it gets to unicorn stage. I would prefer to be acquired at $50 million dollars and stay healthy versus chasing a billion dollars and getting scrapped for $50 million.

I think that there is a lot of inefficient use of capital. Is it necessarily the end game for a large number of founders where they think, “Okay, we can do XYZ. We should be a great acquisition target for $200 to $300 million.” Obviously, there are a lot of jobs that have the line up for that to happen. I have invested in a handful of companies where it was very hard to believe that staying in the market and being competitive all the way to $2 billion is possible.

Sramana Mitra: Fair enough. As I said in the Bootstrapping to Exit article, we have to pay attention to these more niche opportunities that may not have billion dollar or $5 billion market opportunities. This could very well be $700 million to $800 million. If a company executes well and gets to a couple of million dollars, a strategic will have them acquired for a good multiple. These are also reasonable opportunities to make money.

What I’m trying to gauge is where are people’s heads on these opportunities. If I’m running a company that has $50 million to $200 million in revenue and I’m looking for my next product line, now I already have the channel. I got a business that is good, but I’m basically looking like a one-trick pony right now and I need to expand my portfolio of products.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Jason Cahill of McCune Capital
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