Doesn't it come down to who comes up with the price and what their motivation for investing is? When a VC invests in a company, they're looking for a big exit.

Doesn't it come down to who comes up with the price and what their motivation for investing is? When a VC invests in a company, they're looking for a big exit. Essentially, they're trying to predict how much the company might IPO or get acquired for. A public investor is trying to predict the rise in future profits of the company. The difference in motivation matters when you consider a hypothetical. Suppose the company is guaranteed to have stagnant or falling profits. Does that discourage the VC? Not necessarily. They don't care about whether the company can make money. They care about whether they can keep building perceived value in the eyes of anyone who would want to acquire. A public investor, however, would not put their money in that company (at least not for long). Therefore, I think David's main point is sound - VC's are more likely to over-value your company than the market is. We also know this to be true because of what happened in the early 2000's.