Raising Growth Capital: Monetization Mechanism

Ivan Nikkhoo is Managing Director of Simer & Associates (ivan.nikkhoo@siemer.com). In this video he discusses monetization mechanism when raising growth capital.

  1. Monetization mechanism: how you charge for products & services
  2. Every revenue stream has a different value

One of the questions that is less commonly discussed is how a company monetizes its IP. So whether if you are selling an actual product, do you charge for that product? There is a gross margin. You create more of the product and you sell more of the same thing, and your growth is with the core leader to the number of that product that you sell.

However, if you are selling something potentially online or whether something that is a data related or if it’s something that could be sold on a for example, subscription basis. Currently, that is more highly valued.

So if you think about different types of revenues – you have product revenues, you have services revenues, you have transaction revenues, you have subscription revenues – they all carry different valuation parameters and those parameters actually change with time.

For example, a revenue share model is valued very differently than a SaaS model. And those valuations again, change with time. So it is very important that you have a very good sense of what the market is currently bearing, what are the more highly valued monetization mechanisms and try to align your company with that type of a monetization mechanism.