Ep. 75 How Shapeup Got Richard Branson To Boost His Acquisition Offer By 50%

Rajiv Kumar and Brad Weinberg started ShapeUp, a software company designed around getting people to improve their health. Instead of going direct to consumers, they decided to license the platform to large Fortune 500 companies looking to reduce their insurance expenses by getting employees to improve their health. 

The partners sold 20% of the company for $300,000 in start-up capital and went on to raise five more rounds of capital at increasing valuations. They got the business up to $20 million in recurring revenue when they got a call from Richard Branson-backed Virgin Pulse. 

Kumar was able to gin up Virgin’s initial offer by 50% based on some savvy negotiation skills. In the episode, you’ll learn:

• The definition of fixed cost leverage.
• Why you should start with pitching your worst investor first.
• What "escape velocity" means and how it impacts your company’s valuation.
• How optionality gives you negotiating leverage.
• When companies are bought vs. sold.
• The difference between an evergreen fund and one with a liquidity horizon.