Tessellate: Raise Capital or Extend Runway?
Tessellate is a developer tools business operating in US. It closed last financial year at $51 M of annual recurring revenue, growing 28% year on year.
The company burns $22 M per year on a net basis and holds $17 M of cash. Gross margin is 77%, and net revenue retention sits at 104%.
The board has been approached by a growth fund offering $162 M at a $648 M pre-money valuation. The CEO is torn: the round would fund an aggressive push into two adjacent markets, but the founders would take meaningful dilution, and one board member argues the company could reach breakeven on its existing cash instead.
The CFO wants a clear recommendation before the next board meeting.
financials
- arr m
- 51
- cash m
- 17
- growth pct
- 28
- gross margin pct
- 77
- net burn m per year
- 22
- net revenue retention pct
- 104
derived hints
- net new arr
- 14
- burn multiple
- 1.57
- runway months
- 9.3
proposed round
- amount m
- 162
- pre money m
- 648
- implied dilution pct
- 20
Advise the board. Your answer should provide:
- Analysis — the financial position, computed rather than described. Show your working.
- Risks — what could go wrong on each path, and what you would monitor.
- Recommendation — a specific course of action, with the amount and terms you would accept or reject.
State any assumptions you make.
80 points, 60% to pass.
- recommendation20
- market analysis20
- risk assessment20
- financial analysis20
Reveal suggested structure
A strong answer works through, in order:
- Runway — cash ÷ monthly net burn. Here that is $17 M ÷ 1.8 = 9.3 months.
- Efficiency — burn multiple = net burn ÷ net new ARR = 22 ÷ 14 = 1.57. Below 1.5 is good; above 2 is expensive growth.
- Rule of 40 — growth % + margin %. Compare against the sector.
- Dilution — round ÷ post-money.
- Counterfactual — what breakeven requires: how much growth must be sacrificed, and is that a worse outcome than dilution?
- Decision — commit, with trigger conditions.