Note to Startup: Be Predictable

Note to Startup: Be Predictable

Young firms with recurring revenue streams are more likely to find buyers, conference panelists say.

Startups that can generate steady, predictable revenue have a much better chance of getting bought by bigger companies, and are likely to fetch higher prices, panelists said at a conference Thursday.

“It’s not just about the technology or the profitability, it’s about the business model,” Robert Bauer, the vice president and chief technology officer at Xerox Global Services, told technology executives gathered at the Red Herring Fall conference in San Francisco.

As companies increasingly begin to treat software as a service, paying subscription fees for software delivered over the Internet as opposed to license fees for applications installed on desktop machines, steady revenue streams have become more important, he said. “With all small companies, if you can generate recurring revenue streams, the value is greater.”

And startups that provide a new technology are often a better buy for large companies than those focused on offering services, according to panelists.

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