Ninety nine percent of the time when sometime contacts me with a company that is “pre-revenue” (in other words, no revenue or earnings), I politely steer them to some angel investors I know, venture capitalists or entrepreneur organizations. This time was different.
My company has a relationship with Murphy Business and Finance, a main street business brokerage firm. Randy Malmud, the owner of the Beverly Hills office, was engaged with this company, and it seemed like maybe she could use some help so she brought us (Compass Point Capital) in on the deal.
Craig and I flew down and we all met at the Santa Ana John Wayne airport. I was interested because unlike other companies with no revenues, this company has a real product with proven results and obvious potential. It cures cold sores, or rather it eliminates cold sores more quickly than the products currently on the market.
It is exceedingly difficult to value such pre-revenue companies, because, as I’ve written here before, valuation is fundamentally based on future earnings. The value is based purely on projections, and the rate of return the buyer would enjoy if buying the company. This one promises to be a journey.