Rob Walling

We have invested in LLCs and entities from other countries and it is a significant burden financially and time-wise to do that.

Now we know why venture capitalists don't do that.

But realistically, if you want to raise additional funding later, or if you want to, you know, have a significant exit, it's certainly a decent signal to have that C Corp.

So thanks for that question, Ryan.

Hope it was helpful.

My next question is from Alan Reed.

The subject is exit multiples based on top-line revenue.

When people talk about exit multiples, they usually focus on top-line revenue, especially ARR.

There seems to be much less emphasis on EBITDA or free cash flow.

Why is that?

All else being equal, is a company with higher ARR but lower free cash flow really worth more than a company with lower ARR but stronger free cash flow?

I've heard that exit multiples typically range from 4 to 7x ARR.

Does that range factor in differences in profitability?

This is a good question, Alan.

People talk about exit multiples, including me,

in terms of ARR, only when we're talking about SaaS, because SaaS is the best business model in the world.

So you don't talk about ARR or even just top line revenue exit multiples with e-commerce, with agencies, with content sites, with other types of online businesses, because they just don't sell for that.

Those are sold like more traditional businesses.

And the reason we talk about it on this show as ARR is because SaaS is one of the only businesses that sells for top line revenue multiples because SaaS is such an incredible recurring business model.

And especially if you achieve net negative churn, you can really have incredible multiples on that ARR.