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@Velocio
Lots to catch up on during the early commute home.
Microcosm cannot be valued by it's current revenues as it has none, and normally for a company you'd take such a figure against the costs as well as history and some estimation of future trajectory and do some calculations and figure a fair price for a share is X, and whilst the value of the share is below X you should buy, and above X you should sell or hold.
Without revenue, costs or other factors, early stage startups are valued instead on the potential.
The articles you want to read are: http://www.seedcamp.com/resources/how-does-an-early-stage-investor-value-a-startup
And: http://www.investopedia.com/articles/financial-theory/11/valuing-startup-ventures.asp
Microcosm has identified an area already with a proven revenue stream (affiliate advertising).
Microcosm has identified key differentiators against others in this sector (the new software and that this solves a number of problems for admins and users alike).
Microcosm has the key team in place, and this team has the ability and domain experience to execute in this market (technical skills, domain experience running forums, community management skills, team building skills, etc).
And the killer one, Buro 9 has agreed to migrate this website onto Microcosm. Yes, that's me agreeing to something I propose. What it means though is that there will be 15,000 active users shortly after launch of the new product and immediate traction and revenue accordingly.
As such, we are valued at the upper end (but not highest... we don't have Richard Branson on the team) of the range that Seedrs set, that VC firms and angel investors accept. That range being that a new company in this sector (technology) without as credible a footing generally is valued in the £270k region and the shit hot ones in the £650k+ region.
Further, whilst it cannot be factored in as the approach was to Buro 9. Buro 9 received a proposal for LFGSS early in the summer that placed a valuation on the site at £250k, and then would hire me for a two-year lock-in at a six-figure above market rate salary with equity. Which lets you see how an experienced VC firm has already valued the asset that Microcosm would come to own and one of the team members.
None of the current valuation fully factors in any future potential, just the accepted valuation based on the established understanding used by angels in this sector.
The revenue is in the content.
For posts this means affiliate links.
For classifieds a per-listing fee upon sale.
For events, ticket sales.
For reviews, affiliates.
And then fees for perks, such as fully private forums for small organisations, a monthly fee based on usage.
All of those are proven revenue streams, the main part of the proposal and idea is that on their own in it's current form each one would not be enough to cover the costs of a forum today.
But... mixing those together, whilst having a platform that provided a forum at a lower cost, would allow those to be profitable.
LFGSS is profitable, but not massively. Yet it runs on 9 servers which could host another few hundred very small forums, or a few medium forums, or 1 more large forum. If that were achieved it would be very profitable. However that cannot be achieved today as none of the forum software is efficient enough to allow this to occur.
So the basic proposition is that by having more efficient software, that allows a greater number of forums to co-exist on the platform, you can both decrease costs and increase revenue leading to profitability.
The second part of the idea is that the content itself contains revenue streams that have mostly been externalised in forums. Which revenue streams depend on the forums in questions, but some communities use eBay a lot, others use meetup.com a lot, etc. By introducing structured forms of the types of content that are not "posts in a thread" this value that the community has can be brought back into the community itself.
Hence, that we believe that we can increase the revenue that exists in a forum today by doing a good job on the types of content that a community has and fixing the whole user experience and things like privacy around these pieces of content.
Very few forums ever break even on their costs.
They may cover hard costs such as hosting fees by donations and using services like Skimlinks to bring in some affiliate revenue, but they generally lack the volume and efficiency in their affiliate targeting to offset their costs.
When you then factor in needing to maintain servers, update software, react to security bulletins, and all of the things which burden those who run forums... you can see that it is appealing that someone might do this all for you for that thin slice of revenue.
The thing to bear in mind here is that on the long tail of forums, only the top few % make a profit. Everyone else loses. But... the volume of users and affiliates of the long tail summed together could make more than the top few forums.
The proposal to forums admins is that we'll provide the service for free in return for them becoming part of the network and their affiliate fees help cover the whole network.
With efficiencies in the software, the bar at which profitability is achieved should be lower.
I know I would've jumped at this when starting LFGSS, and I have spoken to other forum admins who are very interested. The only ones I expect not to get are automotive forums which are the most profitable forums out there and have no reason to give up their profits. For everyone else, the forum activity is just a direct means of offsetting costs with no risk or liability for the forum admins and no begging cup needed for the community.
On LFGSS I analysed links within posts to determine two things that companies like embed.ly and Skimlinks do not:
1) What would you like embedded that isn't (things like Garmin maps, bikely, etc)?
2) What links go to online stores that have affiliates that could contribute to running costs?
We will be doing the same on Microcosm. Instead of building a generic embedding service or affiliate skimming service, we'll target to the communities we host. Looking to both enhance content and increase user engagement as well as to increase revenue without affecting the user experience (without splashing banner adverts over the site).