Buying the Briggs & Riley - When to Pay Up on Venture Deals

I’ve always been a TJ Maxx kind of traveler - buying whatever felt like a good suitcase, and rolling with it. There have been basic Samsonite carry-ons, Delsey checked luggage, and everything in between. As long as the suitcase closed, rolled, and jammed into an overhead compartment - it was OK by me. 

However, after COVID, I started traveling again - and was bombarded with new options. Everything from Away to Monos to countless other upstarts were recommended by travel blogs (which all seem like affiliate marketing sites now)....though everything looked the same. The only brands that stood out were the super high end ones (Rimowa), or (also pricey) brands with standout warranties. Briggs & Riley has been around for 30 years, and boasts a real lifetime warranty – not a “limited’ lifetime warranty (like most other brands). 

I’m a value oriented investor, but I’m also a value oriented consumer. I hate paying for marketing, or instagram-ability - it’s all about function vs. price. Although my past suitcases have actually lasted relatively long, they’ve all eventually fallen apart. Rolling luggage takes a beating - especially anything traveling through the maze of conveyer belts in an airport. So, durability – or a real warranty does provide tangible value. 

I’m lucky enough where a $600 carry-on is a possible purchase - though it was hard to stomach. TJ Maxx type discount stores have an endless sea of options from $50-$100 - generally around 12-14% the cost of Briggs & Riley. But, none of them have a real warranty - and would probably have to be replaced several times over the next 10-20 years. 

I faced the same issue with my office chair - Office Depot has the same endless sea of options for $50-200. Most look comfortable, and even do feel good…for the first 30-90 days. Then, inevitably, they all seem to break (or get super uncomfortable) within a year. Once COVID started, I did what everyone else did - and bought a somewhat cheap chair. It lasted maybe 6 months, then turned into an uncomfortable, squeaky piece of plastic. I yearned for the really comfortable chair I had at AARP - a Haworth Zody. The Zody chair carries a seemingly solid warranty (though I’ve never had to use it), is dramatically more ergonomic, and should hopefully last 5-10 years. It was 4x the price (even with a promo code) of the Office Depot chair…but if it lasts even a few years, I’ll end up spending less (and have a much better chair). 

Paying for quality (and a warranty to back it up) might not feel good at purchase – but it can often be a wise choice (if possible). So, as a value minded investor - when do I decide to pay up on deals?

There are a few factors that will open up my normal valuation ranges - some are consistent with other funds, and some may be different. But, “paying up” does not equate to west coast style valuations - I cannot stomach paying $20m for a YC grad without any revenue, or 50x+ ARR seed-stage multiples. Here are the core differentiators for my higher-priced deals:

Team with direct experience doing the same thing (with a great exit): If a founding team has built/sold a very similar type of company within the last 5-8 years, theoretically, they’ll have the right playbook to scale up very quickly. I paid up for Alterwood Health in 2021, but the team had a prior, very similar exit - and an incredibly strong reputation locally. I didn’t love paying the valuation, especially as a pre-revenue and pre-launch company. However, I had a lot of confidence in the team – and they have backed up that confidence in the last 3 years. 

Very unique sales channels and scaling paths: If a company has access to truly unique partnerships or people, they could scale up much more efficiently (with more certainty). These access points can provide a little more defensibility as well - at least in the earlier stages of the company. I paid up for one deal years back - partly due to a really impressive founder (based on the intangibles and his hunger), and partly due to a very strategic partnership with a key group (that was incentivized to provide sales leads). 

Very strong ACVs and early metrics: If a company can deliver high ACVs (without really long sales cycles or a need for extensive pilots), it could efficiently scale up (without having to win a ton of clients). If they have early metrics (not always reliable indicators though) that show huge ROIs, quick upsells, and rapid client testimonials - the company might be solving a very painful problem. Sales motion data (how fast clients sign, the client approval process, budget sources, etc) can also provide clues on how the team sells - and if their solution is a true “need to have.” Mid-sized ACVs can also be attractive - assuming the sales motion is efficient (and there are a lot of low hanging prospect clients). 

Huge regulatory tailwinds: If the government, or industry might change legislation, or requirements for an industry – and the company has a nascent solution, things can go very fast. Anytime companies have to do something by law (or by serious fine), companies tend to find budgets, and move fast. If the company is an early mover, they’ll also face less competition (companies will have fewer options). One of my best deals had massive tailwinds from new legislation, and could have even bigger tailwinds from future legislation. 

Very healthy exit multiples: I always look at exit data for similar companies, and the most likely acquirers (both PE and strategic). While certain industries have a variety of ARR multiples (EBITDA multiple exits are not real common for my companies), some are clearly better than others. I stay away from a few main B2B spaces - primarily due to revenue quality and exit multiples. While comps are not always the best indicators where companies will exit, they do provide guardrails and intel for what acquirers could pay. If a company could be a strategic acquisition in a higher multiple industry (one where acquirers will regularly pay 6-14x ARR), I will be more willing to pay up myself. However, if a company is in an industry with fewer possible acquirers, or one where acquirers regularly pay lower end SAAS multiples (i.e. 2-6x ARR) – I tend to be very tight on valuation. 

I don’t love paying up for anything - especially deals. However, there are times when paying up makes more sense, and being cheap actually costs more. Not all the higher priced deals will work, but the ones that do can deliver strong results. Paying up is not something I do in all that many deals, and it still does not feel great to me, but it’s also necessary in venture. As much as I did not want to pay $600 for carry-on luggage or $800 for a chair, it’ll end up saving me money. And at the end of the day, delivering better returns is all I care about - even if I have to pay up at times.