The Dragons slew JobLoft

Just getting home from work, I find the latest episode of Dragon’s Den playing on the TV. It was already half over but I figured I earned some relaxation after a long workday, so I plunked down in front of the couch with my dinner. It was actually quite interesting, the four founders from jobloft.com was asking for an investment of $200,000 for 20% of the company. The Dragons offered $200,000 for 50%, and after some agonizing the founders took the deal.

What is up with that?!? They must be flat broke to take such an awful deal. That means the company is worth only $400,000; and that is wrong on so many levels.

The founders divulged that each customer pays $599/month in fees. On their website they list 35 customers. A quick calculation shows a yearly gross income of $251,580. I don’t know how much profit they make on this gross income, but I think the company is worth at least $1M with that kind of gross income and much more potential. The dragons were right that they are charging too little money for their service, however.

This was essentially an angel deal, but they’ve already given away 50% of their company. They’ll be diluted down to nothing if they ever have to go for a Series A or B.

Maybe I don’t know anything, but I’d never go for that. Crazy! The founders totally got the short end of the stick on this one.

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