Investment Thesis: Defer investment - Awaiting clarity on XYZ valuation and growth.

While XYZ Company's strong LTV and CAC metrics reflect its potential within the SaaS e-
commerce landscape, the decision is to put this investment on hold but continue to closely
monitor the company. The company's LTV/CAC ratio has risen to $209 and its CAC has
impressively decreased to $6 in 2022, both indicating efficient customer acquisition and
retention. At the same time, EBITDA margin shows a solid 19%. However, most growth metrics
are decelerating, driving concerns on expenditure efficiency.
Advantages:
Significant Customer Value: The company's high LTV at $1166 in 2022 demonstrates the
considerable revenue generated over the average customer lifespan.
Decreasing Acquisition Costs: The declining CAC to $6 underlines the company's ability to
attract customers more cost-effectively over time.
Concerns:
Delayed Technology ROI: Despite investing $1 million in technology development in 2021, we
are yet to see a substantial increase in growth that aligns with this high expenditure.
Slowing Growth Rates: A decline in the growth rate of orders placed and customer acquisition
raises cautionary flags about the current scalability and market penetration strategies.
Surging Salary Expenses: A 50% rise in salary expenses in 2022 calls for a deeper analysis to
understand its impact on the company’s financial runway and overall cost structure.
Strategic Outlook:
Given these factors, particularly the latest yield from technology investments and the increased
overheads, it is advised to defer investment. A reinvestment thesis may be considered upon
observing a positive shift in key performance metrics such as order and customer acquisition
rates, and a more balanced approach to operational spending.
Reevaluation Conditions:
Growth Metric Improvements: Any future consideration for investment will be dependent on a
reversal of the current decelerating growth trends.
Salary Expenditures Justification: An analysis to ascertain that the increase in salary
expenditures directly contributes to enhancing the company’s value proposition and market
position.
Conclusion:
Considering XYZ Company's request for $2 million at a $20 million post-money valuation for a
10% equity stake, Subtle Capital opts for a strategic pause. The current valuation and the equity
on offer suggest a period of watchful waiting is prudent. Should the next financial period reveal a
materialization of technology investments into heightened growth, and provided the salary
increases are justified through tangible outcomes, Subtle Capital may revisit the investment
opportunity with a renewed perspective.
Annex: Ratios Calculation
2016 2017 2018 2019 2020 2021 2022

1) Customer Aduisition Cost (CAC) 114 37 12 9 7 6 6

Marketing Expenses 2,280,000 1,380,000 690,000 720,000 720,000 750,000 780,000
New Customers 19,920 37,020 56,006 78,444 101,373 121,870 139,642

2) Contribution Margin Per Order: 176 201 230 249 287 317 334
Average Selling Price per Order 192.5 216 244 263 300 330 346
Variable Cost Per Order 17 15 14 14 13 13 12

3) Customer Lifetime Value (LVT) 936 744 782 853 964 1134 1166
Avergage Lifespan of a Customer 4 4 4 4 4 4 4
Gross Contribution per Customer 234 186 195 213 241 284 292

Gross Contribution per Customer: 234 186 195 213 241 284 292
Contribution Margin Per Order 176 201 230 249 287 317 334
Average Number of Order per customer 1.33 0.92 0.85 0.86 0.84 0.90 0.87
Total Number of orders 19,920 25,680 36,240 50,640 63,840 81,840 91,440
Number of Unique Customers 14,940 27,765 42,604 59,133 76,030 91,402 104,732

4) LTV/CAC ratio 8.18 19.95 63.45 92.94 135.72 184.32 208.75

5) Payback (# per order) 0.489 0.001 0.000 0.000 0.000 0.000 0.000
CAC 114 37 12 9 7 6 6
Gross Contribution per Customer: 234 186 195 213 241 284 292