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I think it also shows the stunning level of mass delusion in the SV VC space. To this day I don't know whether the people who throw around and parrot the valua

I think it also shows the stunning level of mass delusion in the SV VC space. To this day I don't know whether the people who throw around and parrot the valuations actually mean it. I mean, take the price of a small portion of an asset that is illiquid and in short supply, and assume the same price would apply for valuing the whole? This sort of crap wouldn't fly amongst kids in kindergarten, so I'm astounded that it is being perpetuated on this scale. I really feel like a massive reality distortion field has been pulled over our eyes by the inflow of easy money. I don't know, it feels like deja vu. The same mistakes were done in the early 2000s, then 2008. Except we all think that back then people were idiots to not see it.

rossdavidh 7y ago
Two possibilities: 1) Jamie Dimon and Softbank/Saudi Arabia are the only idiots here, and everybody else just chipped in relatively small amounts; neither could be considered classically "SV VC". 2) Similar to many people deciding to all buy the same stock at the same time, bidding it up far beyond it's real value but hoping to sell before everyone else realizes it, the VC money was thinking that the sheer size of their investment would make everyone else get on board, allowing them to cash out. A sort of "pump and dump" before it technically went public, such that it is (perhaps) not illegal, except that they did it too late in the cycle so people spotted a bad deal before buying.
- short_sells_poo 7y ago
  Sorry I should've been more specific. I didn't mean this valuation specifically. We is really looney bin category. I mean the industry as a whole.
  - rossdavidh 7y ago
    Oh, well in that case, it's a combination of: 1) lying, and... 2) there are no better numbers available for an early stage company. You can't go by profitability or revenue early on, because there's a lot you need to do before you get your first customer, and some of that continues to pay off. So, in the absence of reliable measures of value (a long history), they make do with the least bad method available (how much did somebody guess it would be worth). I think also, if you have to find a place to park billions or tens of billions of dollars, it's easy to convince yourself that the $10million company you're looking at is worth a billion, or the $1billion company you're looking at is worth ten billion. The alternative is to go back to your own investors and say, "sorry, there's not enough good ideas out there to invest in, here's your money back". It's got to be hard to convince yourself that's the least bad option.
tener 7y ago
To be fair public company valuations are not that different. Sure, the price discovery is more efficient, but still if you were to sell any significant part of the stock it would lower the value of the company.
Hongwei 7y ago
Anecdotally, no one in SV ever believed in WeWork except Softbank. I couldn't find anyone to take the Bull case on WeWork, whereas at least some people could argue Uber had a real business model that depended on self driving cars. WeWork, and Theranos before it, are not really the norm in SV. But SV and the tech ecosystem in general has a culture of "money talks," so when Softbank and Kissinger start backing these ridiculous companies, people think "well, good for them?" and move on. Skepticism towards WeWork's model has been the conventional position since Day 1, but no one is going to argue about the validity of Masa Son's dollars.
- skinnymuch 7y ago
  Softbank didn’t start investing in WeWork until others had gotten it to a $16B valuation 3-4 years ago. A lot of the investors weren’t SV but some were in its history.
  - AceJohnny2 7y ago
    > others had gotten it to a $16B valuation Which just shows how much "valuation" is bullshit. I would've thought that was clear ever since 37Signals were (sarcastically) valued at $100B in 2009: https://signalvnoise.com/posts/1941-press-release-37signals-valuation-tops-100-billion-after-bold-vc-investment https://signalvnoise.com/posts/1941-press-release-37signals-... (They repeated the joke at least in 2011 and 2015. Maybe 2009 wasn't the first time either)
    - skinnymuch 7y ago
      Yeah for sure. I think we are on the same page. I was specifically pointing out the OP seemingly putting SV at odds with WeWork implying WeWork is ridiculous with ego, money, et al, and not SV.
cowmoo728 7y ago
https://twitter.com/dhh/status/672050463395741696 https://twitter.com/dhh/status/672050463395741696 > CHICAGO — December 1, 2015–Basecamp is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1. > In order to increase the value of the company, Basecamp has decided to stop generating revenue.

rossdavidh 7y ago

Two possibilities: 1) Jamie Dimon and Softbank/Saudi Arabia are the only idiots here, and everybody else just chipped in relatively small amounts; neither could be considered classically "SV VC". 2) Similar to many people deciding to all buy the same stock at the same time, bidding it up far beyond it's real value but hoping to sell before everyone else realizes it, the VC money was thinking that the sheer size of their investment would make everyone else get on board, allowing them to cash out. A sort of "pump and dump" before it technically went public, such that it is (perhaps) not illegal, except that they did it too late in the cycle so people spotted a bad deal before buying.

short_sells_poo 7y ago
Sorry I should've been more specific. I didn't mean this valuation specifically. We is really looney bin category. I mean the industry as a whole.
- rossdavidh 7y ago
  Oh, well in that case, it's a combination of: 1) lying, and... 2) there are no better numbers available for an early stage company. You can't go by profitability or revenue early on, because there's a lot you need to do before you get your first customer, and some of that continues to pay off. So, in the absence of reliable measures of value (a long history), they make do with the least bad method available (how much did somebody guess it would be worth). I think also, if you have to find a place to park billions or tens of billions of dollars, it's easy to convince yourself that the $10million company you're looking at is worth a billion, or the $1billion company you're looking at is worth ten billion. The alternative is to go back to your own investors and say, "sorry, there's not enough good ideas out there to invest in, here's your money back". It's got to be hard to convince yourself that's the least bad option.

tener 7y ago

To be fair public company valuations are not that different. Sure, the price discovery is more efficient, but still if you were to sell any significant part of the stock it would lower the value of the company.

Hongwei 7y ago

Anecdotally, no one in SV ever believed in WeWork except Softbank. I couldn't find anyone to take the Bull case on WeWork, whereas at least some people could argue Uber had a real business model that depended on self driving cars. WeWork, and Theranos before it, are not really the norm in SV. But SV and the tech ecosystem in general has a culture of "money talks," so when Softbank and Kissinger start backing these ridiculous companies, people think "well, good for them?" and move on. Skepticism towards WeWork's model has been the conventional position since Day 1, but no one is going to argue about the validity of Masa Son's dollars.

skinnymuch 7y ago
Softbank didn’t start investing in WeWork until others had gotten it to a $16B valuation 3-4 years ago. A lot of the investors weren’t SV but some were in its history.
- AceJohnny2 7y ago
  > others had gotten it to a $16B valuation Which just shows how much "valuation" is bullshit. I would've thought that was clear ever since 37Signals were (sarcastically) valued at $100B in 2009: https://signalvnoise.com/posts/1941-press-release-37signals-valuation-tops-100-billion-after-bold-vc-investment https://signalvnoise.com/posts/1941-press-release-37signals-... (They repeated the joke at least in 2011 and 2015. Maybe 2009 wasn't the first time either)
  - skinnymuch 7y ago
    Yeah for sure. I think we are on the same page. I was specifically pointing out the OP seemingly putting SV at odds with WeWork implying WeWork is ridiculous with ego, money, et al, and not SV.

cowmoo728 7y ago

https://twitter.com/dhh/status/672050463395741696 https://twitter.com/dhh/status/672050463395741696 > CHICAGO — December 1, 2015–Basecamp is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1. > In order to increase the value of the company, Basecamp has decided to stop generating revenue.