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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
by 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 agoSorry 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 agoOh, 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.