We have developed several seniors based on modest assumptions along with supporting data to service how many Joint Venturs, and Partners we need for UNICORN STATUS
LOW
To find out how many 100,000 annual contracts at a 28% gross margin with a 10% non-renewal rate are needed to reach a billion-dollar valuation, it’s essential to look at this from a financial modeling perspective. This will differ for each industry (Marketing Tech, SaaS, MedTech) due to various factors such as growth rates, risks, and multiples investors are willing to pay. However, a simplified model can be used to get a rough idea.
Assumptions
- Each contract is worth $100,000 annually.
- Gross Margin is 28%.
- Non-renewal rate is 10%.
- We’ll use a Price to Sales (P/S) ratio for simplification, with different values for each industry.
- Marketing Tech: P/S ratio of 6
- SaaS: P/S ratio of 10
- MedTech: P/S ratio of 4
Step 1: Calculate Gross Revenue Per Contract
Gross Margin for each contract: $100,000 x 0.28 = $28,000
Step 2: Calculate Renewal Rate
Renewal rate = 100% – 10% = 90%
Step 3: Calculate Annual Gross Margin per Contract Considering Non-Renewal
Gross Margin considering non-renewal: $28,000 x 0.9 = $25,200
Step 4: Calculate Required Gross Margin to Achieve a Billion-Dollar Valuation
Required Gross Margin for a billion-dollar valuation for each industry:
- Marketing Tech: $1,000,000,000 / 6 = $166,666,667
- SaaS: $1,000,000,000 / 10 = $100,000,000
- MedTech: $1,000,000,000 / 4 = $250,000,000
Step 5: Calculate Required Number of Contracts
Number of $100,000 contracts required for each industry:
- Marketing Tech: $166,666,667 / $25,200 = 6,620 (approx.)
- SaaS: $100,000,000 / $25,200 = 3,968 (approx.)
- MedTech: $250,000,000 / $25,200 = 9,921 (approx.)
Conclusion
To achieve a billion-dollar valuation:
- Marketing Tech would need approximately 6,620 contracts.
- SaaS would need approximately 3,968 contracts.
- MedTech would need approximately 9,921 contracts.
It’s essential to note that these are simplified calculations and real-world conditions such as operating expenses, taxes, debt, and other factors are not considered. Investors also look at other factors like market share, growth rate, and risks which are not accounted for in this model.
Extended contracts for Exclusive Partnerships
When contracts are renewable with a 10-year life span, the calculations change considerably due to the recurring nature of the revenue. This recurring revenue is particularly valuable and can have a significant impact on company valuation.
Assumptions
- Each contract is worth $100,000 annually.
- Gross Margin is 28%.
- Non-renewal rate is 10%.
- The life of each contract is 10 years.
- P/S ratios are the same as before:
- Marketing Tech: P/S ratio of 6
- SaaS: P/S ratio of 10
- MedTech: P/S ratio of 4
Step 1: Calculate Gross Margin per Contract
Gross Margin for each contract: $100,000 x 0.28 = $28,000
Step 2: Calculate Renewal Rate
Renewal rate = 100% – 10% = 90%
Step 3: Calculate 10-Year Gross Margin Considering Non-Renewal
Since the contracts are renewable every year for 10 years with a 90% renewal rate:
10-Year Gross Margin = $28,000 + ($28,000 x 0.9) + ($28,000 x 0.9^2) + … + ($28,000 x 0.9^9)
After calculating, the 10-Year Gross Margin per contract turns out to be approximately $227,535.
Step 4: Calculate Required Gross Margin to Achieve a Billion-Dollar Valuation
- Marketing Tech: $1,000,000,000 / 6 = $166,666,667
- SaaS: $1,000,000,000 / 10 = $100,000,000
- MedTech: $1,000,000,000 / 4 = $250,000,000
Step 5: Calculate Required Number of 10-Year Contracts
Number of 10-Year contracts required for each industry:
- Marketing Tech: $166,666,667 / $227,535 = 733 (approx.)
- SaaS: $100,000,000 / $227,535 = 440 (approx.)
- MedTech: $250,000,000 / $227,535 = 1,099 (approx.)
Conclusion
To achieve a billion-dollar valuation with 10-year contract life and a 10% non-renewal rate:
- Marketing Tech would need approximately 733 contracts.
- SaaS would need approximately 440 contracts.
- MedTech would need approximately 1,099 contracts.
The recurring nature of the contracts significantly reduces the number of contracts required to achieve a billion-dollar valuation. Again, please note that these are simplified calculations and real-world conditions like operating expenses, taxes, and other variables are not considered.
Mid
When considering a 20-year life span with a 10% increase in contract value each year, the valuation calculation becomes more complex. The 10% increase in contract value and the longer 20-year duration will have a significant impact on the total gross margin generated by each contract.
Assumptions
- Initial contract value is $100,000 annually.
- Gross Margin is 28%.
- Non-renewal rate is 10%.
- The life of each contract is 20 years.
- Contract value increases by 10% each year.
- P/S ratios are the same as before:
- Marketing Tech: P/S ratio of 6
- SaaS: P/S ratio of 10
- MedTech: P/S ratio of 4
Step 1: Calculate Gross Margin per Contract
Initial Gross Margin for each contract: $100,000 x 0.28 = $28,000
Step 2: Calculate Renewal Rate
Renewal rate = 100% – 10% = 90%
Step 3: Calculate 20-Year Gross Margin Considering Non-Renewal and Annual Increase
The formula for calculating the 20-year gross margin for each contract becomes more complex due to the annual 10% increase and 90% renewal rate. The formula would be:
20−���� Gross Margin=∑�=019(28,000×(1.1)�×0.9�)20−Year Gross Margin=n=0∑19(28,000×(1.1)n×0.9n)
After calculating, the 20-Year Gross Margin per contract turns out to be approximately $693,442.
Step 4: Calculate Required Gross Margin to Achieve a Billion-Dollar Valuation
- Marketing Tech: $1,000,000,000 / 6 = $166,666,667
- SaaS: $1,000,000,000 / 10 = $100,000,000
- MedTech: $1,000,000,000 / 4 = $250,000,000
Step 5: Calculate Required Number of 20-Year Contracts
Number of 20-Year contracts required for each industry:
- Marketing Tech: $166,666,667 / $693,442 = 240 (approx.)
- SaaS: $100,000,000 / $693,442 = 144 (approx.)
- MedTech: $250,000,000 / $693,442 = 361 (approx.)
Conclusion
To achieve a billion-dollar valuation with a 20-year contract life, a 10% non-renewal rate, and a 10% annual increase in contract value:
- Marketing Tech would need approximately 240 contracts.
- SaaS would need approximately 144 contracts.
- MedTech would need approximately 361 contracts.
The extended 20-year lifespan and the 10% annual increase in contract value significantly reduce the number of contracts needed for a billion-dollar valuation. As always, these are simplified calculations, and real-world variables like operating expenses, taxes, and other factors are not accounted for.
RECAP FOR CFO NOTES:
CFO-Level Summary: Contract-Based Valuation Model
Executive Summary
This report outlines a financial model to assess the number of contracts needed to achieve a billion-dollar valuation in three different sectors: Marketing Tech, SaaS, and MedTech. The model considers long-term contracts with varying lifespans, annual increases in contract value, and annual renewal rates.
Key Assumptions
- Initial Annual Contract Value: $100,000
- Gross Margin: 28%
- Non-Renewal Rate: 10%
- Contract Lifespan: 10 years and 20 years considered
- Annual Contract Value Increase: 10% (for 20-year contracts)
- Industry Valuation Multiples:
- Marketing Tech: P/S ratio of 6
- SaaS: P/S ratio of 10
- MedTech: P/S ratio of 4
Financial Implications
10-Year Contract Model
- Marketing Tech: ~733 contracts
- SaaS: ~440 contracts
- MedTech: ~1,099 contracts
20-Year Contract Model with 10% Annual Increase
- Marketing Tech: ~240 contracts
- SaaS: ~144 contracts
- MedTech: ~361 contracts
Blended Average
For a more holistic view, taking an average across all scenarios and industries yields the following blended contract numbers:
- 10-Year Model: Average of ~757 contracts
- 20-Year Model with 10% Annual Increase: Average of ~248 contracts
Conclusion and Recommendation
The findings indicate that long-term contracts, especially those with a 20-year lifespan and a 10% annual value increase, substantially lower the number of contracts needed to achieve a billion-dollar valuation. The blended average suggests approximately 248 contracts under the 20-year model would be sufficient across industries.
Given the high value and low risk associated with long-term contracts that have annual increases, potential investors may find a compelling opportunity for sustainable revenue and growth.
This model is simplified and does not account for operational expenses, tax implications, or industry-specific risks, among other variables. Further due diligence is advised for a comprehensive evaluation.
CFO SUMMARY
CFO-Level Summary: Revised Contract-Based Valuation Model
Executive Summary
This report presents a financial model to ascertain the number of contracts required to reach a billion-dollar valuation, focusing on three key sectors: Marketing Tech, SaaS, and MedTech. This updated model assumes an initial annual contract value of $300,000.
Key Assumptions
- Initial Annual Contract Value: $300,000
- Gross Margin: 28%
- Non-Renewal Rate: 10%
- Contract Lifespan: 20 years
- Annual Contract Value Increase: 10%
- Industry Valuation Multiples:
- Marketing Tech: P/S ratio of 6
- SaaS: P/S ratio of 10
- MedTech: P/S ratio of 4
Financial Implications
Using the 20-Year Contract Model with a 10% annual increase in contract value, we find:
- Initial Gross Margin per contract: $300,000 x 0.28 = $84,000
- 20-Year Gross Margin per contract considering 10% annual increase and 90% renewal rate: ~$2,080,326
Number of 20-Year contracts required for each industry:
- Marketing Tech: ~80 contracts
- SaaS: ~48 contracts
- MedTech: ~120 contracts
Blended Average
Taking a blended average across all industries for the 20-year model with the $300,000 initial contract value yields an average of approximately ~83 contracts required to reach a billion-dollar valuation.
Conclusion and Recommendations
The higher initial annual contract value of $300,000 significantly reduces the number of contracts needed across all industries to achieve a billion-dollar valuation. Specifically, the blended average across industries suggests that around 83 contracts under the 20-year model would suffice.
Investors should be informed that focusing on higher-value, long-term contracts with annual increments offers a more efficient path to substantial valuations. This model remains a simplified version and doesn’t consider factors like operational expenses, taxes, or industry-specific risks. Therefore, additional due diligence is recommended for a more comprehensive evaluation.
EXECUTIVE SUMMARY
Executive Summary Chart: 5-Year Path to Unicorn Status
| Metric | Low Estimate | Medium Estimate | High Estimate |
|---|---|---|---|
| Initial Contract Value | $100,000 | $200,000 | $300,000 |
| 10-Year Model | |||
| – Marketing Tech | 147 | 74 | 49 |
| – SaaS | 88 | 44 | 29 |
| – MedTech | 220 | 110 | 73 |
| 20-Year Model w/ 10% Increase | |||
| – Marketing Tech | 48 | 24 | 16 |
| – SaaS | 29 | 15 | 10 |
| – MedTech | 72 | 36 | 24 |
| Blended Average (10-Year Model) | |||
| – Contract Count | 152 | 76 | 51 |
| Blended Average (20-Year Model) | |||
| – Contract Count | 50 | 25 | 17 |
Key Points:
- Low, Medium, High Estimates: Vary based on the initial contract value ($100K, $200K, $300K).
- 10-Year vs. 20-Year Models: Two scenarios were considered, with the 20-year model also accounting for a 10% annual contract value increase.
- Blended Average: Represents the average number of contracts needed across the three industries (Marketing Tech, SaaS, MedTech) to reach a billion-dollar valuation within a 5-year timeframe.
The above chart is a simplified representation for quick reference and should be augmented by the detailed financial models for a comprehensive understanding.
By focusing on higher-value, long-term contracts, especially those that increase in value annually, the company has a clearer and more efficient path to achieving Unicorn Status.
AGGRESSIVE SUMMARY WITH 50% HIGHER MULTIPLES USED IN VALUATIONS
Executive Summary Chart: Aggressive 5-Year Path to Unicorn Status (50% Higher Multiples)
| Metric | Low Estimate | Medium Estimate | High Estimate |
|---|---|---|---|
| Initial Contract Value | $100,000 | $200,000 | $300,000 |
| 10-Year Model | |||
| – Marketing Tech | 98 (↓49) | 49 (↓25) | 33 (↓16) |
| – SaaS | 59 (↓29) | 29 (↓15) | 19 (↓10) |
| – MedTech | 147 (↓73) | 73 (↓37) | 49 (↓24) |
| 20-Year Model w/ 10% Increase | |||
| – Marketing Tech | 32 (↓16) | 16 (↓8) | 11 (↓5) |
| – SaaS | 19 (↓10) | 10 (↓5) | 7 (↓3) |
| – MedTech | 48 (↓24) | 24 (↓12) | 16 (↓8) |
| Blended Average (10-Year Model) | |||
| – Contract Count | 101 (↓51) | 51 (↓25) | 34 (↓17) |
| Blended Average (20-Year Model) | |||
| – Contract Count | 33 (↓17) | 17 (↓8) | 11 (↓6) |
Key Points:
- Low, Medium, High Estimates: These vary based on the initial contract value of $100K, $200K, and $300K.
- 10-Year vs. 20-Year Models: We considered two scenarios; the 20-year model also includes a 10% annual contract value increase.
- Blended Average: Represents an average number of contracts needed across the three industries (Marketing Tech, SaaS, MedTech) to reach a billion-dollar valuation within 5 years.
- AAROW DOWN Numbers: (↓17) These numbers are adjusted downwards due to the use of 50% higher multiples for each industry. These are aggressive valuations and would require substantial justification in a real-world scenario.
The aggressive multiples substantially reduce the number of contracts needed to achieve Unicorn status, offering a more optimistic yet high-risk outlook. As with any aggressive financial model, extra due diligence and risk assessment are advised.
Executive Summary: Fastest Path to Unicorn Status with Fewest Contracts
Objective:
To identify the quickest and most efficient path for reaching a billion-dollar valuation (“Unicorn Status”) across different sectors (Marketing Tech, SaaS, MedTech), while requiring the fewest number of contracts.
Key Finding:
Utilizing an aggressive valuation model with 50% higher multiples and an initial annual contract value of $300,000 leads to the lowest required contract count.
Fastest Path Summary:
- Sector: Software as a Service (SaaS)
- Initial Annual Contract Value: $300,000
- Valuation Model: 20-Year Contract with a 10% Annual Increase
- Valuation Multiple: 50% Higher (Aggressive)
- Required Contract Count: 7 contracts
Key Points:
- High-Value, Long-Term Contracts: Focusing on contracts with a $300,000 initial value and a 20-year lifespan minimizes the number of required contracts.
- Annual Value Increase: The model assumes a 10% increase in contract value annually, thus boosting the lifetime value of each contract.
- Aggressive Valuation Multiple: The use of 50% higher multiples provides a high-risk but high-reward valuation perspective.
Conclusion:
Opting for a long-term contract model (20 years) in the SaaS sector, with an aggressive valuation multiple and a high initial annual contract value of $300,000, provides the fastest path to achieving Unicorn Status with the fewest contracts. This would require onboarding just 7 such contracts over a 5-year span.
Note: This model adopts an aggressive valuation approach and as such, additional due diligence and comprehensive risk assessment are highly recommended.
Sales Team Targets: Path to Unicorn Status
| Scenario | Low Estimate ($100k) | Medium Estimate ($200k) | High Estimate ($300k) | Aggressive High ($300k) |
|---|---|---|---|---|
| 10-Year Model | ||||
| – Marketing Tech | 147 | 74 | 49 | 33 |
| – SaaS | 88 | 44 | 29 | 19 |
| – MedTech | 220 | 110 | 73 | 49 |
| Blended Average (10-Year) | 152 | 76 | 51 | 34 |
| 20-Year Model w/ 10% Increase | ||||
| – Marketing Tech | 48 | 24 | 16 | 11 |
| – SaaS | 29 | 15 | 10 | 7 |
| – MedTech | 72 | 36 | 24 | 16 |
| Blended Average (20-Year) | 50 | 25 | 17 | 11 |
Legend:
- Low, Medium, High Estimates: Based on the initial contract values of $100,000, $200,000, and $300,000, respectively.
- Aggressive High: Uses an initial contract value of $300,000 and 50% higher valuation multiples for an aggressive model.
- 10-Year vs. 20-Year Models: Reflects the number of contracts needed based on either a 10-year or 20-year contract lifespan.
- Blended Average: Average number of contracts required across the three sectors.
This chart provides a comprehensive guide for your sales team to plan their efforts strategically across different sectors and financial models. The “Aggressive High” column represents the fastest path to Unicorn Status, requiring just 7 contracts in the SaaS sector under the 20-year model with a 10% annual increase.
Sales Team Targets: Path to Unicorn Status (20% Gross Margin)
| Scenario | Low Estimate ($100k) | Medium Estimate ($200k) | High Estimate ($300k) | Aggressive High ($300k) |
|---|---|---|---|---|
| 10-Year Model | ||||
| – Marketing Tech | 206 | 103 | 69 | 46 |
| – SaaS | 123 | 62 | 41 | 27 |
| – MedTech | 308 | 154 | 103 | 69 |
| Blended Average (10-Year) | 213 | 106 | 71 | 47 |
| 20-Year Model w/ 10% Increase | ||||
| – Marketing Tech | 67 | 34 | 23 | 15 |
| – SaaS | 40 | 20 | 14 | 9 |
| – MedTech | 101 | 51 | 34 | 23 |
| Blended Average (20-Year) | 70 | 35 | 24 | 16 |
Sales Team Targets: Path to Unicorn Status (34% Gross Margin)
| Scenario | Low Estimate ($100k) | Medium Estimate ($200k) | High Estimate ($300k) | Aggressive High ($300k) |
|---|---|---|---|---|
| 10-Year Model | ||||
| – Marketing Tech | 122 | 61 | 41 | 27 |
| – SaaS | 73 | 37 | 25 | 16 |
| – MedTech | 183 | 92 | 61 | 41 |
| Blended Average (10-Year) | 126 | 63 | 42 | 28 |
| 20-Year Model w/ 10% Increase | ||||
| – Marketing Tech | 40 | 20 | 14 | 9 |
| – SaaS | 24 | 12 | 8 | 5 |
| – MedTech | 60 | 30 | 20 | 14 |
| Blended Average (20-Year) | 42 | 21 | 14 | 9 |
Legend:
- Low, Medium, High Estimates: Based on the initial contract values of $100,000, $200,000, and $300,000, respectively.
- Aggressive High: Uses an initial contract value of $300,000 and 50% higher valuation multiples for an aggressive model.
- 10-Year vs. 20-Year Models: Reflects the number of contracts needed based on either a 10-year or 20-year contract lifespan.
- Blended Average: Average number of contracts required across the three sectors.
These charts illustrate how adjustments in gross margin can significantly alter the contract counts needed for achieving Unicorn Status. With a 34% gross margin, the path is notably more efficient, while a 20% margin would require a greater number of contracts.
Sales Team Targets: Slowest Path to Unicorn Status (20% Gross Margin)
| Scenario | Low Estimate ($100k) |
|---|---|
| 10-Year Model | |
| – Marketing Tech | 206 |
| – SaaS | 123 |
| – MedTech | 308 |
| Blended Average (10-Year) | 213 |
Legend:
- Low Estimate: Based on the initial contract value of $100,000.
- 10-Year Model: Reflects the number of contracts needed based on a 10-year contract lifespan.
- Blended Average: Average number of contracts required across the three sectors.
Summary:
The slowest path to reach Unicorn Status would involve the following conditions:
- Sector: No specific sector has a clear advantage in this conservative model; however, MedTech requires the highest number of contracts.
- Initial Annual Contract Value: $100,000
- Contract Length: 10 years
- Gross Margin: 20%
Under these conditions, you would need approximately 213 contracts on average across the sectors to reach a billion-dollar valuation in a 10-year model.
This path would entail a larger sales force, extended time to reach the goal, and higher capital requirements due to the low gross margin and lower contract value. Hence, strategic planning, persistent efforts, and rigorous cost controls would be vital in this scenario.
What happens when you add a 1 Million dollar-a-year contract?
Sales Team Targets: Impact of $1 Million Contract (34% Gross Margin)
| Scenario | Medium Estimate ($200k) | Medium + $1M Contract |
|---|---|---|
| 10-Year Model | ||
| – Marketing Tech | 61 | 60 |
| – SaaS | 37 | 36 |
| – MedTech | 92 | 91 |
| Blended Average (10-Year) | 63 | 62 |
| 20-Year Model w/ 10% Increase | ||
| – Marketing Tech | 20 | 19 |
| – SaaS | 12 | 11 |
| – MedTech | 30 | 29 |
| Blended Average (20-Year) | 21 | 20 |
Legend:
- Medium Estimate: Based on the initial contract value of $200,000.
- Medium + $1M Contract: Includes the impact of adding a single $1 million contract to the medium estimate.
- 10-Year vs. 20-Year Models: Reflects the number of contracts needed based on either a 10-year or 20-year contract lifespan.
- Blended Average: Average number of contracts required across the three sectors.
Summary:
The addition of a single $1 million contract reduces the required contract count by approximately one for each sector and each model, indicating that such a high-value contract can have a meaningful impact. In aggregate, it reduces the blended average contract count by 1-2 contracts, thereby potentially speeding up the path to a billion-dollar valuation. This emphasizes the value of targeting high-value contracts in addition to regular ones.
VALUE OF A $1M contract at 20% renewing
LOWER OUTPUT INCREASES THE NUMBER OF CUSTOMERS REQUIRED TO MEET UNICORN STATUS
For a $1 million contract renewing each year for 30 years without any drop-off rate, the gross profit per contract per year would be $1,000,000 \times 0.22 = $220,000.
In this case, with a 30-year lifespan for each contract and 100% retention, the total gross profit from one such contract over the 30 years would be:
$220,000 \times 30 = $6,600,000
To achieve a billion-dollar valuation, you would need:
1,000,000,0006,600,000≈1526,600,0001,000,000,000≈152
You would need approximately 152 of these $1 million contracts, each renewing for 30 years with a 22% gross margin and a 100% retention rate, to reach a billion-dollar valuation.
As always, this is a simplified calculation and doesn’t account for other factors like the time value of money, operational expenses, or cost of capital.
HIGH OUTPUT LOWERS AMOUNT OF NEW CUSTOMERS NEEDED
For a $1 million contract renewing each year for 30 years without any drop-off, and a 28% gross margin, the annual gross profit per contract would be $1,000,000 \times 0.28 = $280,000.
With a 30-year lifespan for each contract and 100% retention, the total gross profit from one such contract over 30 years would be:
$280,000 \times 30 = $8,400,000
To achieve a billion-dollar valuation, you would need:
1,000,000,0008,400,000≈1198,400,0001,000,000,000≈119
You would need approximately 119 of these $1 million contracts, each renewing for 30 years with a 28% gross margin and a 100% retention rate, to achieve a billion-dollar valuation.
This is a simplified calculation and does not account for additional variables like time value of money, operational expenses, or the cost of capital.
NEW CUSTOMER SUMMARY TARGET
We need 1 new high volume customer a month to meet UNICORN SALES GOALS!
