A little less than a year ago, I invested in a technology company that provides the back-end framework for porn companies. I invested via a company called AdultVest, which brings accredited investors and adult-entertainment companies together.
Last week, while in LA, I stopped by the corporate offices of AdultVest and met the founder and president, Francis Koenig. He’s a smart young guy, in his mid-thirties and is a “2nd generation hedge fund manager”. He had a very interesting office, with 500 lb bronze elephants and giraffes and various oil paintings adorning the walls.
He was very excited about some of the acquisitions they were working on. One of them was a start-up search engine that was already making $700k net profit on $2.1 million gross revenue in just its 2nd year. He had it under contract to purchase for $1.7 million of which $1 million was upfront, and the remaining was to be paid out after 12 months if the revenues didn’t drop. Pretty smart strategy!
He thinks that with some marketing effort, they should be able to increase the revenues and profit ten fold and take it public. Typically, adult entertainment companies that are public sell for a P-E ratio between 4 and 9. Assuming a 5 fold increase in revenue and PE of 4, thats a 20 times increase in valuation, which Koenig thinks they can achieve in under 3 years. Pretty impressive if he accomplishes that.
I’ll be following their progress pretty closely. Lets see how it works out.