Blog Archives

Basics of Unit Economics Analysis

When an investment passes our first-screen at Meritage Funds, the first deep-dive we typically do is on the unit economics of the business. Unit economics are the fundamental financial building blocks of a business. If you can pin down the unit economics, you can determine contribution margins, break-even points and perform ROI calculations all of which can help to determine whether a Company’s economic engine works. Without an understanding of unit economics, predicting whether a business can be profitable in the long-term is all guess-work.

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Posted in Economics, Growth Equity, Investment Selection, Raising Capital

How we say “No” matters

I have to say “No”; alot. In fact, every one of us investor-types says “No” much more than we say yes. How we say “No” matters; alot.

Sometimes, you don’t know you have said “No” well until years after the fact. Today, I had one of those moments. Several weeks ago, Todd Vernon, founder and former CEO of Lijit and now, founder and CEO of VictorOps asked to have lunch. I didn’t ask the topic, because we’ve known Todd for a long time and because I like Todd. We had lunch today.

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Posted in Investment Selection, Lessons Learned, Raising Capital, Venture Capital

Introducing Digital Fortress

Today, my Partners and I at Meritage Funds announced that we’ve established a new platform in the data center colocation market. Headquartered in Seattle, WA, Digital Fortress operates nearly 50,000 square feet of data center colocation space, focused on delivering high-power density installations to enterprise customers. A  Meritage Funds blog post announcing the investment has much more on our thesis and goals for the investment.

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Posted in Growth Equity, Investment Selection, New Investments

One Surefire Way to Screw up Your Lifestyle Business

Some businesses are designed – maybe even destined – to be owner operated. Industry parlance often refers to these businesses as lifestyle businesses. Wikipedia has a nice definition. They are typically small, profitable, generate cash and enable their owner-operator to sustain a well-above average lifestyle. In some circumstances, they may even make their owner-operator filthy rich over time.

Some people may think that the term lifestyle business is an insult. I couldn’t disagree more. Being the owner-operator of a lifestyle business should be a source of pride; a badge of honor.

Posted in Growth Equity, Investment Selection, Lessons Learned, Raising Capital

Growth – I Like Mine Non-Linear

My Partners and I at Meritage have always had an investment mandate with broad stage flexibility. We’ve often described our investment practice as “multi-stage”, ranging from early/venture through later stage opportunities. This is in contrast to our sector preferences which are tightly and highly refined. It should come as no surprise then that we’ve been doing some soul-searching about our stage preferences.

Posted in Growth Equity, Investment Selection
Derek Pilling

About Derek

I'm a Managing Director with Meritage Funds, a growth equity investment firm based in Denver, CO. I've been working with growth stage businesses my entire career. When I'm not working, I ski, spin, coach youth sports and spend time with my beautiful wife and three kids.

I blog because the process helps me crystalize how I frame the world. I want to hear what you think. Please comment.

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Colorado - Entrepreneurial by Nature

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