A short, conversational panel (Jason M. Lemkin and others) analyzes Melio’s sale and its implications. They note Melio previously raised a late-stage round valuing it at about $4B (and a corporate round at ~$2.5B) while the preference stack was about $650M; the resulting sale price produces limited investor upside (often 1x preference) and can yield near-0% IRR for some late-stage investors. The speakers argue this dynamic both exposes distortions in late-stage pricing and can be liberating for founders—if investors simply take their 1x preference, founders may sell at lower headline prices without investor vetoes.
Chapters
We all throw around, oh, they'll buy my portfolio company for 900 million or 2 point billion. But are you sure you're better than Melio? I'm not so sure.
I think the interesting thing also about that one was that, you know, they'd raised a couple of rounds significantly above that in value. I think they'd raised in 21, two rounds, the last of which was four and a half billion. Right. So you know, you look back on that and you go, look, on the one hand it just shows what a lovely rigged game the late stage business is. If you always get a, if you always get a 1x on your losers and you haven't enough winners, by definition you have a positive irr. It's a nice thing. On the other hand, it just shows how wrong you can be. You sat there in 2021 thinking I should buy at 4.5 billion in the expectation of making it 2 or 3x which implies 13 billion plus. And you fast forward 3 or 4 years and you're happily taking 2 billion.
I mean the pref stack here was 650, so 650 total pref stack. And then the last round was 4 billion by GC. And so to your point on like pref stack to outcome size being the risk that you're taking, like 100% here, like you have pretty minimal risk when going in at that, I think.
Yeah, I mean you're still getting a.
0% IRR but yeah, I guess it's limited.
Agreed. But you're getting a 0% IRR and you lose this again, the interesting to.
Me, I guess this is captain obvious. Okay, I'm a little slower than the two of you, but this is actually a little bit good for founders. Okay, last round at Melio, 4 billion, okay, 500. 500 times revenue or something like that. Right. And then there was a corporate round at two and a half billion. But like if you, if you're getting your preference back, you know, and it's below your 4 billion, you don't really care what the price is. Like you know, when I, you mean, I mean I almost killed myself as a founder of Fretting. I had to like at least quintuple my investors money. Right. But as long as if they're only getting 1x, they don't really care what the headline number is, do they? Like in a way the pressure's off a little bit.
Well, they don't. I mean, but, but I thought you're going to say something different, which is.
Earlier guys care, the other guys care.
And more importantly, the founder cares. I mean, you know.
Yeah, but they're going to, just going to. They're going to make their own decision. It's binary, right? They're going to. They're going to make their own decision. I think it's liberating for a founder to say, goodness, I can sell my company for two and a half billion and these, these, these bozos with the blazers aren't going to say no.
