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Startup investing is not based on revenues, like it would be if you were investing in a part share of a restaurant or something like that. When a startup is va
by pg 16y ago
Startup investing is not based on revenues, like it would be if you were investing in a part share of a restaurant or something like that. When a startup is valued at $10 million, it doesn't mean that the company, as is, is worth $10 million so much as that it has a 1% chance of one day being worth $1 billion.
The way you make money investing in startups is to make a lot of bets that each have a small chance of paying off big. So while I'm not saying anything about the specific companies you list (most of which I don't know anything about), a list of recent startup fundings should always include a lot (perhaps a majority) that investors will ultimately lose money on.
The problem is, you don't know which the winners will be. They usually tend to look very unpromising. If you'd made this list 5 years ago, it would have included a web site for college students, bizarrely thought to be worth tens of millions of dollars.
- chailatte 16y agoAll of what you've said is true. However, there is still a trend in rising valuation (near bubble level), of which many other investors have noted as well. Mark Suster: What Angel Investing & Florida Condos Have in Common http://www.bothsidesofthetable.com/2010/11/14/what-angel-investing-florida-condos-have-in-common/ http://www.bothsidesofthetable.com/2010/11/14/what-angel-inv... Fred Wilson: The Dot Com Bubble Is Back http://www.secondshares.com/2010/11/18/the-dot-com-bubble-is-back-fred-wilson-and-john-doerr-discuss/ http://www.secondshares.com/2010/11/18/the-dot-com-bubble-is... The Trouble with Bubbles (talent, angel & incubators… oh my!) http://calacanis.com/2010/11/18/the-trouble-with-bubbles-talent-angel-incubators-oh-my/ http://calacanis.com/2010/11/18/the-trouble-with-bubbles-tal...
- hasenj 16y agoIsn't that exactly what a bubble is? Ok, not "exactly", but come on: "the majority of startup companies will end up losing money" sounds like a very bubbly thing.
- abossy 16y ago"The majority of startup companies will end up losing money" is a tautology: true no matter what the inputs are.
- deleted 16y ago[deleted]
- Goladus 16y agoA bubble is when investors are making lots of money off other investors by trading stuff that isn't worth anything. Risk is being grossly and broadly mis-assessed (deliberately or inadvertently). The bubble pops when people realize this. In that sense, "majority of startup companies will end up losing money" is actually not a bubbly thing at all. Bubble mentality would be "most startup companies will IPO for huge valuations within a few years."