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How does an investor benefit from overpaying for equity?

• sangnoir 10y ago
  > How does an investor benefit from overpaying for equity? It's not overpaying if they know exactly what they are doing and why: they can afford to pay for an inflated valuation. Also, value is subjective. If you go down Sandy Hill doing valuations, you're bound to get wildly different values - which one would you consider "correct" or "overpaying"? Possible benefits, in no particular order: * Increases chances of startup accepting their investment. * Halo-effect on their investment. If $STARTUP is worth $X billion, then surely "they are onto something big". This in turn increases the chance of the startup succeeding * Prestige/profit. If you were publicly buying a painting for ap speculation/resale, surely you can afford to pay 10% extra if it increases the painting's percieved value by 30%. Now you own a painting that's worth 30% more than it's "real" value (had you not paid more) * fear of missing out on 'hot' startups.
  • acchow 10y ago
    I humbly suggest that the wildly varying values you get on Sand Hill is from varying beliefs, not a conspiracy or a scam. VC's generally don't invest in snake oil or try to pawn off snake oil.
    • sangnoir 10y ago
      > I humbly suggest that the wildly varying values you get on Sand Hill is from varying beliefs, not a conspiracy or a scam. I wasn't suggesting conspiracy, my point is there is no "one true valuation" so answering the original question "valuation according to whom?" doesn't provide useful information.