All posts from in,

I’ve finally calculated the value of a dollar

I’ve finally calculated the value of a dollar

Sovereign Valley Farm, Chile

A few days ago a young entrepreneur came to me with her big idea for a business.

This happens a lot, sometimes even 3-4 times per week.

And while our selection rate is very low, I pay attention to each and every pitch in our effort to find the real gems, because, in my view, a profitable private business is one of the best assets you can hold.

Unlike stocks, the value of a private business (outside of the ‘tech' sector) is generally based on what really counts: profit.

Private businesses can do well in both inflation AND deflation; and they aren't subject to the whims of central bankers.

It's a tremendous asset class to own, and our team spends a lot of time sniffing out the best deals. Hers was not one of them.

I listened patiently as she went through her pitch, and at the end she offered us a special opportunity to buy 20% of her business for $250,000.

There was just one problem.

She didn't have a business. There were no employees, no team, no product, no prototype, no design, no revenue, no testing, no website, no assets.

She didn't even have a company or a bank account.

She had nothing but an idea.

And based on her calculations, she thought her idea was worth $1 million.

(This is what's known as a ‘pre-money valuation'. The ‘post-money' valuation would be $1 million plus the $250,000 investment capital = $1.25MM. We would own 20% of that, or $250k/$1.25MM)

Yes, it's true that a great business is the best asset you can own.

But as I tell students at our annual entrepreneurship camps, the most important aspect of any business is execution– the ability to turn an idea into a plan and methodically...