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It’s not really a vanity metric in this day and age. A lot of the best companies aren’t going public... ever. The measure that determines whether it’s a vanity

It’s not really a vanity metric in this day and age. A lot of the best companies aren’t going public... ever. The measure that determines whether it’s a vanity metric or not is liquidity. If there are a dozen investors willing to buy stock at $x it’s worth $x.

sanderjd 9y ago
> The measure that determines whether it’s a vanity metric or not is liquidity. Ok, are those figures available?
- austenallred 9y ago
  There’s not really a way to get those numbers outside of asking a bunch of random people. I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active.
  - dsacco 9y ago
    I think you should clarify what liquidity means in your anecdote, because liquidity is a function of time and volume. Definitionally speaking, shares in a private company are not as liquid as shares in a public company. So what does "completely liquid" mean? Could every owner of private shares find a buyer if they wanted to? If not, what subset could? That these figures are not public is a very important discussion point, because it does introduce some level of anecdata and arbitrary speculation into the discussion. That's not to say you're wrong, but it's certainly imprecise and questionable.
    - austenallred 9y ago
      It means I had shares that I could sell a ton a moments notice on a secondary market, and so far as I could tell the market for those shares was enormous. I’d guess anyone, including VCs and founders, at the top 50 or so YC companies could sell their shares at any time to a large number of willing buyers, given the ability to do so. Therefore I’d argue that the value of those shares is far different from a “vanity metric.”
      - sanderjd 9y ago
        > anyone, including VCs and founders What about non-founder employees?
        austenallred 9y ago
        Yes them too (I wasn’t a founder)
        sanderjd 9y ago
        Are there any limitations to who can do what in the secondary markets? (Thanks for your answers to my questions - it's not easy to find information on this and I don't know anybody at a company like this to ask.)
  - sanderjd 9y ago
    > I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active. In the top 50 what? The top 50 private companies?
    - austenallred 9y ago
      The top 50 YC companies as measured by valuation
dsacco 9y ago
> If there are a dozen investors willing to buy stock at $x it’s worth $x. This is not a correct representation of liquidity, and thinking about it under this definition can be very dangerous. You need to consider: 1. How many shares are there outstanding? 2. What is the ask price of those shares on paper? 3. What is the bid price of those shares by investors willing to purchase them on the private market? 4. How many owners are allowed to sell their shares at the same time? 5. How many owners could realistically find a buyer at the paper ask price of the shares? 6. How many owners could sell their shares before the existing deviation (spread) between the paper ask price and available bid prices changed? This is not to say your overall point is wrong, it's to say that it can't be defended this way; more importantly, we really shouldn't be simplifying our discussion and its definition of liquidity to the one you've presented here, which is too simplistic. There is a lot of nuance about price discovery between public and private valuation that's missing here. For (one) example, you can maintain an artificially inflated valuation of a private company if there are fewer owners willing/able to sell than there are buyers, despite a relatively larger set of potential owners either not allowed to, or not conveniently capable of, selling their shares. This scenario makes presents an asymmetry between the weighting and availability of positive vs negative price sentiment that is much more easily resolved in the public market.
- austenallred 9y ago
  Of course there’s a lot of nuance there. But certainly we can all agree on two things: 1. YC has not had good returns because it has only had one IPO (apparently selling Twitch and Cruise for $1B each don’t count as a win?) 2. While it’s difficult to know what the true value of YC companies is, the fact that there are nearly 100 companies valued at $100m+ is not just a “vanity metric.” Especially st the later stages of more mature companies there are real dollars trading hands and there’s more liquidity available on secondary markets.
  - dsacco 9y ago
    Sure, I agree with those two points.

sanderjd 9y ago

> The measure that determines whether it’s a vanity metric or not is liquidity. Ok, are those figures available?

austenallred 9y ago
There’s not really a way to get those numbers outside of asking a bunch of random people. I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active.
- dsacco 9y ago
  I think you should clarify what liquidity means in your anecdote, because liquidity is a function of time and volume. Definitionally speaking, shares in a private company are not as liquid as shares in a public company. So what does "completely liquid" mean? Could every owner of private shares find a buyer if they wanted to? If not, what subset could? That these figures are not public is a very important discussion point, because it does introduce some level of anecdata and arbitrary speculation into the discussion. That's not to say you're wrong, but it's certainly imprecise and questionable.
  - austenallred 9y ago
    It means I had shares that I could sell a ton a moments notice on a secondary market, and so far as I could tell the market for those shares was enormous. I’d guess anyone, including VCs and founders, at the top 50 or so YC companies could sell their shares at any time to a large number of willing buyers, given the ability to do so. Therefore I’d argue that the value of those shares is far different from a “vanity metric.”
    - sanderjd 9y ago
      > anyone, including VCs and founders What about non-founder employees?
      - austenallred 9y ago
        Yes them too (I wasn’t a founder)
        sanderjd 9y ago
        Are there any limitations to who can do what in the secondary markets? (Thanks for your answers to my questions - it's not easy to find information on this and I don't know anybody at a company like this to ask.)
- sanderjd 9y ago
  > I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active. In the top 50 what? The top 50 private companies?
  - austenallred 9y ago
    The top 50 YC companies as measured by valuation

dsacco 9y ago

> If there are a dozen investors willing to buy stock at $x it’s worth $x. This is not a correct representation of liquidity, and thinking about it under this definition can be very dangerous. You need to consider: 1. How many shares are there outstanding? 2. What is the ask price of those shares on paper? 3. What is the bid price of those shares by investors willing to purchase them on the private market? 4. How many owners are allowed to sell their shares at the same time? 5. How many owners could realistically find a buyer at the paper ask price of the shares? 6. How many owners could sell their shares before the existing deviation (spread) between the paper ask price and available bid prices changed? This is not to say your overall point is wrong, it's to say that it can't be defended this way; more importantly, we really shouldn't be simplifying our discussion and its definition of liquidity to the one you've presented here, which is too simplistic. There is a lot of nuance about price discovery between public and private valuation that's missing here. For (one) example, you can maintain an artificially inflated valuation of a private company if there are fewer owners willing/able to sell than there are buyers, despite a relatively larger set of potential owners either not allowed to, or not conveniently capable of, selling their shares. This scenario makes presents an asymmetry between the weighting and availability of positive vs negative price sentiment that is much more easily resolved in the public market.

austenallred 9y ago
Of course there’s a lot of nuance there. But certainly we can all agree on two things: 1. YC has not had good returns because it has only had one IPO (apparently selling Twitch and Cruise for $1B each don’t count as a win?) 2. While it’s difficult to know what the true value of YC companies is, the fact that there are nearly 100 companies valued at $100m+ is not just a “vanity metric.” Especially st the later stages of more mature companies there are real dollars trading hands and there’s more liquidity available on secondary markets.
- dsacco 9y ago
  Sure, I agree with those two points.