5 ms·

I don't get it, from the video, they say brokers make 3-5 billion a year, yet, they value the company at 800 million? I've never seen a startup valued at this

by bedros 9y ago

I don't get it, from the video, they say brokers make 3-5 billion a year, yet, they value the company at 800 million? I've never seen a startup valued at this large percentage of market size please correct me if I'm wrong

mbateman 9y ago
2% of 4B earnings market-wide would be 80M, 10x valuation on 80M is 800M.
spiznnx 9y ago
A company is usually worth a multiplier of annual earnings, since they make that money every year.
- eloff 9y ago
  Startups are not evaluated like that though, the earnings multiplier approach only really applies to big public companies, and even then not so well - just look at Tesla or Amazon stock.
gricardo99 9y ago
He also says he sees the broker business as a foot-in-the-door for a much bigger, broader logistics business. If you go to flexport, it certainly seems they're pushing more a global logistics solution. I'm guessing the valuation is based on more than just the broker business.
abhi3 9y ago
Here we have a business that is going after a huge existing market. For some perspective, Slack is valued at > 5 Billion
- eloff 9y ago
  Here's where the market is being irrational in my opinion. I would bet that in 10 years Flexport dwarfs Slack in revenue and in growth potential.
  - pbreit 9y ago
    I'd take that bet. Slack is more like Facebook meets LinkedIn.
    - erdle 9y ago
      Oh, I will take the other side of this bet.
      - rtx 9y ago
        I can draw an contract for a 10% fees.
        KGIII 9y ago
        Someone set up an escrow service. I want in. As an aside, I have pondered the viability of an escrow service aimed specifically at people who want to wager about topics like these. I see this at verious forums, someone says Company A will be bankrupt in a year and another one says that won't happen. One of them frequently pipes up to say, "I'll bet you $100 that I'm right!" Yet, nobody ever takes the chance to capitalize on those potential bets. Basically, they would set their terms, agree on those terms, upload those terms in a verifiable way as the terms they agreed to, pay their money, and then wait for the time period to end. At that point, someone at the escrow company will review the wager and the evidence and decide who gets the payout, less the fees associated with it. Not all bets are easy to judge, so writing accurate terms would be important. The service will supply, if needed, impartial judging of the merits. I suppose the company would also need to have the ability to refuse to accept certain bets, perhaps insisting that they make the goals clearly articulated and demonstrable success or failures would be important. They might even enable it for multiple parties. Each bet would require a deposit of the entire amount due. I suppose people could even go so far as to set odds, if they wanted. I'm pretty sure this should be a thing.
        svieira 9y ago
        I believe you are looking for http://longbets.org/ http://longbets.org/
throwayit 9y ago
The value of a company is not equal to it's revenue - that doesn't make sense. To give an example, let's say someone offered to sell you a magic bean which caused $10 to appear magically every year. Would the bean grower sell it to you for $10? Probably not unless they needed cash immediately, since they could make $50 from the bean in 5 years. Instead value of a company is the perpetual value of the cash flows to the buyer. The problem is for startups we have very little idea what their cash flows will be in the future. Their revenues could be anywhere, we have no idea what their costs will be (how many sales people do you need, how much R&D, etc.), etc. So because of that valuation becomes a very imprecise art. Outside of the cash flow approach, another approach for valuing a company is to consider future buyers. Suppose you have a magic bean that returns 50 cents each year in perpetuity. However, the magic bean is called MagicBeanAI and since AI is hot you know you can sell that bean for $50 to someone else. In this case you would be willing to buy it for <$50 regardless of MagicBeanAI's cash flows. This is what happens when markets start to behave irrationally. Eventually people realize they don't have any more suckers to sell to and their MagicBeanAIs value goes to almost nothing. This is essentially a market crashl; google "tulip mania" for more examples.
pbreit 9y ago
Have you seen Uber which is value a 2-10x the entire size of the taxi market?
uhhhhhhh 9y ago
They've already moved to become a full forwarder, including warehousing, order consolidation and other services (or are in the progress), so I imagine this valuation is based on the market for forwarders, not brokers. from the article: Petersen told Forbes he expects revenue of $500 million this year, yet that still makes Flexport an underdog. “There are 25 freight forwarders that each do more than $1 billion in revenue a year,” he said.

by bedros 9y ago

mbateman 9y ago

2% of 4B earnings market-wide would be 80M, 10x valuation on 80M is 800M.

spiznnx 9y ago

A company is usually worth a multiplier of annual earnings, since they make that money every year.

eloff 9y ago
Startups are not evaluated like that though, the earnings multiplier approach only really applies to big public companies, and even then not so well - just look at Tesla or Amazon stock.

gricardo99 9y ago

He also says he sees the broker business as a foot-in-the-door for a much bigger, broader logistics business. If you go to flexport, it certainly seems they're pushing more a global logistics solution. I'm guessing the valuation is based on more than just the broker business.

abhi3 9y ago

Here we have a business that is going after a huge existing market. For some perspective, Slack is valued at > 5 Billion

eloff 9y ago
Here's where the market is being irrational in my opinion. I would bet that in 10 years Flexport dwarfs Slack in revenue and in growth potential.
- pbreit 9y ago
  I'd take that bet. Slack is more like Facebook meets LinkedIn.
  - erdle 9y ago
    Oh, I will take the other side of this bet.
    - rtx 9y ago
      I can draw an contract for a 10% fees.
      - KGIII 9y ago
        Someone set up an escrow service. I want in. As an aside, I have pondered the viability of an escrow service aimed specifically at people who want to wager about topics like these. I see this at verious forums, someone says Company A will be bankrupt in a year and another one says that won't happen. One of them frequently pipes up to say, "I'll bet you $100 that I'm right!" Yet, nobody ever takes the chance to capitalize on those potential bets. Basically, they would set their terms, agree on those terms, upload those terms in a verifiable way as the terms they agreed to, pay their money, and then wait for the time period to end. At that point, someone at the escrow company will review the wager and the evidence and decide who gets the payout, less the fees associated with it. Not all bets are easy to judge, so writing accurate terms would be important. The service will supply, if needed, impartial judging of the merits. I suppose the company would also need to have the ability to refuse to accept certain bets, perhaps insisting that they make the goals clearly articulated and demonstrable success or failures would be important. They might even enable it for multiple parties. Each bet would require a deposit of the entire amount due. I suppose people could even go so far as to set odds, if they wanted. I'm pretty sure this should be a thing.
        svieira 9y ago
        I believe you are looking for http://longbets.org/ http://longbets.org/

throwayit 9y ago

The value of a company is not equal to it's revenue - that doesn't make sense. To give an example, let's say someone offered to sell you a magic bean which caused $10 to appear magically every year. Would the bean grower sell it to you for $10? Probably not unless they needed cash immediately, since they could make $50 from the bean in 5 years. Instead value of a company is the perpetual value of the cash flows to the buyer. The problem is for startups we have very little idea what their cash flows will be in the future. Their revenues could be anywhere, we have no idea what their costs will be (how many sales people do you need, how much R&D, etc.), etc. So because of that valuation becomes a very imprecise art. Outside of the cash flow approach, another approach for valuing a company is to consider future buyers. Suppose you have a magic bean that returns 50 cents each year in perpetuity. However, the magic bean is called MagicBeanAI and since AI is hot you know you can sell that bean for $50 to someone else. In this case you would be willing to buy it for <$50 regardless of MagicBeanAI's cash flows. This is what happens when markets start to behave irrationally. Eventually people realize they don't have any more suckers to sell to and their MagicBeanAIs value goes to almost nothing. This is essentially a market crashl; google "tulip mania" for more examples.

pbreit 9y ago

Have you seen Uber which is value a 2-10x the entire size of the taxi market?

uhhhhhhh 9y ago

They've already moved to become a full forwarder, including warehousing, order consolidation and other services (or are in the progress), so I imagine this valuation is based on the market for forwarders, not brokers. from the article: Petersen told Forbes he expects revenue of $500 million this year, yet that still makes Flexport an underdog. “There are 25 freight forwarders that each do more than $1 billion in revenue a year,” he said.