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Great quote about ‘Unicorns’ (lightly edited from verbal form): “I looked through the list of companies that have an over a billion dollar valuation recently,

by firasd 11y ago

Great quote about ‘Unicorns’ (lightly edited from verbal form): “I looked through the list of companies that have an over a billion dollar valuation recently, and more than half, I think, were valued between like a billion and 1.5 billion, and something like a quarter were valued exactly at a billion. So people are clearly obsessed with getting to this mark, and they are willing to put all sorts of weird structure on their terms to get there. If you were looking at the financial data, you would say something is amiss. You’d say there is some fraud going on or something, if you were just looking at the numbers. Because they don’t fit the distribution you’d expect. There is this huge desire to get right to a billion or just over. I don’t care about it. I think it’s dumb, but that’s not going to make a company great or not.” As a sidenote, Sam should probably stop antagonizing his interviewers by dismissing the business pontification featured on their shows :) I agree with him but it’s also a bit unnecessary.

lambdasquirrel 11y ago
Well how do you address a trollish question then? Honest question. At some point, you need to push back.
- firasd 11y ago
  Well, why isn’t he interested in pontificating about the business environment? It’s probably because he doesn’t consider it worthwhile. I would just say that: I don’t pontificate on trends when I don’t see concrete value in reasoning about them. If you’re literally on someone’s show and dismissing their program or channel it’s a bit biting. Their whole raison d’etre is to talk about the business environment.
zem 11y ago
nope. pet peeve - symbolism isn't irrational. "a billion dollars" is a powerful symbol, and may well pay off as much in psychological benefits as it loses in structural weirdness. or it may not, but it's definitely not clear-cut enough to dismiss as "dumb".
- firasd 11y ago
  Yes but anytime you are engineering “financials” instead of engineering sales and customer satisfaction you are headed down a path that warps things. In the case of unicorn valuations it’s your term sheet: investors who are getting in at high symbolic valuations are asking for special provisions to protect downside that you wouldn’t otherwise grant them.
  - beambot 11y ago
    All of those (eg. sales and psychology) are interrelated. For example, say you're an enterprise SaaS company. Saying, "We have a $1B valuation and aren't going anywhere" actually carries meaningful psychological weight during the sales process -- weight which could be the difference between winning or losing out to a competitor. In that regard, it may matter...
  - hkmurakami 11y ago
    That valuation (perversely) likely affects hiring as well.
- seiji 11y ago
  How is it not dumb? It's an arbitrary number of digits in base 10 numerals. Perhaps your point would be better addressed during your next regularly scheduled Bloomberg interview?
  - on_ 11y ago
    > How is it not dumb? Because PLS Logistics Services does ~$100m a year more than dropbox (PLS rev is $515.6m) and has a growth rate of 42% and no one has ever heard of it. Dropbox was reportedly valued at $10 billion in November 2014, when it raised $350 million in its Series C[0]. You can plot the failure of the company on a graph inversely proportional to moores law, and yet they are "crushing it". So with less liquidity, they somehow have extracted maximum mileage out of being a 'Unicorn', being on the top of every 'unicorn list', and getting heaps of coverage in the media. They will IPO and exit which, after the lockup period ends, is a win. So, to what extent is being a 'Unicorn' priced into the company? No one knows of course because we can't even see their financials. So other companies don't have to really engineer anything. Just get close to that num, and then wait 6 months. So, the point is, the media's obsession with ranking things is important and being in that top 10 list is helpful. Donald Trump has become qualified to run America because he was on television, has > $1b, and is on a list. [0]https://www.cbinsights.com/blog/dropbox-valuation-bubble/ https://www.cbinsights.com/blog/dropbox-valuation-bubble/
dperfect 11y ago
Maybe Benford's Law[1] has something to do with the distribution being skewed toward the $1 billion mark (at least in part). [1] https://en.wikipedia.org/wiki/Benford%27s_law https://en.wikipedia.org/wiki/Benford%27s_law
- lambdasquirrel 11y ago
  Actually, I'm pretty sure it proves he's right. In these distributions, the percentages matter a lot. I think the mentioned figures were upwards of 50% for startups in the 1-2 Billion valuation range? That's a fairly nontrivial difference from the expected 30%. Is there a real stats person around here? I bet that if you plugged in the numbers into the formulas in "Statistical Tests" in the link that you gave, it would pretty much show that Sam is right. When I punched in the numbers and ran the Chi-Square test, it seemed kind of off. :P https://docs.google.com/spreadsheets/d/1FoSfPvRSLK04ySAfjEqEXbVCLEoeeMv6KkCAKxKiYIM/edit?usp=sharing https://docs.google.com/spreadsheets/d/1FoSfPvRSLK04ySAfjEqE...
deleted 11y ago
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by firasd 11y ago

lambdasquirrel 11y ago

Well how do you address a trollish question then? Honest question. At some point, you need to push back.

firasd 11y ago
Well, why isn’t he interested in pontificating about the business environment? It’s probably because he doesn’t consider it worthwhile. I would just say that: I don’t pontificate on trends when I don’t see concrete value in reasoning about them. If you’re literally on someone’s show and dismissing their program or channel it’s a bit biting. Their whole raison d’etre is to talk about the business environment.

zem 11y ago

nope. pet peeve - symbolism isn't irrational. "a billion dollars" is a powerful symbol, and may well pay off as much in psychological benefits as it loses in structural weirdness. or it may not, but it's definitely not clear-cut enough to dismiss as "dumb".

firasd 11y ago
Yes but anytime you are engineering “financials” instead of engineering sales and customer satisfaction you are headed down a path that warps things. In the case of unicorn valuations it’s your term sheet: investors who are getting in at high symbolic valuations are asking for special provisions to protect downside that you wouldn’t otherwise grant them.
- beambot 11y ago
  All of those (eg. sales and psychology) are interrelated. For example, say you're an enterprise SaaS company. Saying, "We have a $1B valuation and aren't going anywhere" actually carries meaningful psychological weight during the sales process -- weight which could be the difference between winning or losing out to a competitor. In that regard, it may matter...
- hkmurakami 11y ago
  That valuation (perversely) likely affects hiring as well.
seiji 11y ago
How is it not dumb? It's an arbitrary number of digits in base 10 numerals. Perhaps your point would be better addressed during your next regularly scheduled Bloomberg interview?
- on_ 11y ago
  > How is it not dumb? Because PLS Logistics Services does ~$100m a year more than dropbox (PLS rev is $515.6m) and has a growth rate of 42% and no one has ever heard of it. Dropbox was reportedly valued at $10 billion in November 2014, when it raised $350 million in its Series C[0]. You can plot the failure of the company on a graph inversely proportional to moores law, and yet they are "crushing it". So with less liquidity, they somehow have extracted maximum mileage out of being a 'Unicorn', being on the top of every 'unicorn list', and getting heaps of coverage in the media. They will IPO and exit which, after the lockup period ends, is a win. So, to what extent is being a 'Unicorn' priced into the company? No one knows of course because we can't even see their financials. So other companies don't have to really engineer anything. Just get close to that num, and then wait 6 months. So, the point is, the media's obsession with ranking things is important and being in that top 10 list is helpful. Donald Trump has become qualified to run America because he was on television, has > $1b, and is on a list. [0]https://www.cbinsights.com/blog/dropbox-valuation-bubble/ https://www.cbinsights.com/blog/dropbox-valuation-bubble/

dperfect 11y ago

Maybe Benford's Law[1] has something to do with the distribution being skewed toward the $1 billion mark (at least in part). [1] https://en.wikipedia.org/wiki/Benford%27s_law https://en.wikipedia.org/wiki/Benford%27s_law

lambdasquirrel 11y ago
Actually, I'm pretty sure it proves he's right. In these distributions, the percentages matter a lot. I think the mentioned figures were upwards of 50% for startups in the 1-2 Billion valuation range? That's a fairly nontrivial difference from the expected 30%. Is there a real stats person around here? I bet that if you plugged in the numbers into the formulas in "Statistical Tests" in the link that you gave, it would pretty much show that Sam is right. When I punched in the numbers and ran the Chi-Square test, it seemed kind of off. :P https://docs.google.com/spreadsheets/d/1FoSfPvRSLK04ySAfjEqEXbVCLEoeeMv6KkCAKxKiYIM/edit?usp=sharing https://docs.google.com/spreadsheets/d/1FoSfPvRSLK04ySAfjEqE...

deleted 11y ago

[deleted]