Drew Fallon

Introducing Fin: The world’s first AI Chief Financial Officer.

Fin outperforms humans 100% of the time.

RT + Comment “FIN” and I’ll send you an AI agent that saves 6-7 figures/year.

RO REACHES $3B RUN RATE, PASSES HIMS & HERS FOR FIRST TIME EVER IN REVENUE

Ro, the direct to consumer weight loss brand, announced in a post on X that the brand had crossed $3B in run rate revenue - up from $270m in 2021.

The founder declared Ro a 'zombie company' in 20212 - and details the 'refounding' of the company in his blog post.

hims & hers - the leader in the space for most of history - has raised about $1.88B, including a $1B convertible note in May of 2025, versus Ro's ~$1B raised all in private markets.

Over 100 of our brands are founder-led growth stage brands - nearly all of them want to exit their businesses, but they all fall into the same trap:

They grow too fast

And It takes me about 1 second to be able to tell which ones are falling for it

You can figure out the ones who are growing too fast by looking at 2 columns on the P&L; revenue and operating income; if ebitda isnt ~5% or higher, and growth is over 60/70%, you're doing it wrong.

These founders see brands like Hero Cosmetics, rhode skin, or Coterie growing like weekds, but they tend to not realize that these are very unicorny businesses that are having their cake and eating it too on profitability and growth

There are 2 exceptions to what I am about to explain:

1) you are early on in your J curve, fine, but you're not ready to sell now - there's an entire class of capital providers we aptly refer to as 'growth equity' who will invest unprofitable businesses that with steep growth trajectory. The playbook is to find one of these investors, grow some more, find positive ebitda then exiting to a strategic or financial buyer

2) a strategic NEEDS you and is not so much concerned with financial valuations.

However if you are planning for a fairway PE exit, you are doing yourself a disservice by pursuing that level of growth, as buyers will generally not give you any credit or value after a certain level of growth.

This comes down to a concept conventionally known as 'the rule of 40' - the balance of revenue growth rate + ebitda margin equaling 40, when ebitda is positive.

40, really not THAT high of a number. These days maybe its more like the rule of 50, but the concept prevails: you really only need so much growth; and anything beyond 40 or 50% - most PE buyers are going to look at it and just throw their hands up in the air and say we dont know how to underwrite this

said differently:

You are SO much better off growing 50%, then 40%, then 35% versus 150%, 50%, 10%

It makes the business much more predictable and therefore more underwritable for PE buyers

The chart below shows that many recent strategic acquisitions were well in excess of the rule of 40, with strong ebitda all around. If this is you, you'd generally earn a higher exit multiple - brands over the rule of 40 had median 4.5x EV/Sales exit vs sub rule of 40 had 3.3x EV/Sales exits

And remember, the brands highlighted below are the best of the best. If you want to maximize optionality and be able to attract the most buyers possible, most founders would be better off focused building real, solid businesses that balance growth with profitability vs. swinging for the fences to become the next brand on this chart.

though we do like to see that too :)

much love in the comments🥹

This is 100% true.

we never claimed to do 'live' P&Ls, however Ben would not know this because he got iris via one of our accounting firm partners and didnt go through our sales cycle

running a full ETL process on thousands of orders is impossible live. We choose accuracy over speed. iris refreshes a few times a day at most