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Valuation is based on expected value. How much time they spent on the startup is irrelevant. For example, if a startup has a 1% chance of being worth $1B, then
by paul 16y ago
Valuation is based on expected value. How much time they spent on the startup is irrelevant. For example, if a startup has a 1% chance of being worth $1B, then it's worth about $10M (very rough math since actual outcomes aren't quite that binary).
Also, many companies are raising at lower valuations.
- ghshephard 16y agoNo arguments whatsoever. I think you are reformulating my "Option D" - there is a small expectation of a few big hits that will make up for the many losses, and the investors go in realizing that not every startup with a $10 Million valuation, has a high chance of being $10 Million or more. Another way of saying this, is that these types of investments are clearly _not_ for the conservative investor who can only afford to invest in one company.
- paul 16y agoHas anyone ever said that startup investing is appropriate for conservative investors who can only make one investment? In fact, the only bold text on my blog post about startup investing says exactly the opposite of that: http://paulbuchheit.blogspot.com/2011/01/angel-investing-my-first-three-years.html http://paulbuchheit.blogspot.com/2011/01/angel-investing-my-...
- harscoat 16y agoWhat this also means is that YC adds/gets 35x value (w/ assumption $17k for 6%) out of the door.
- paul 16y agoBTW, in case my "many companies are raising at lower valuations" statement isn't clear enough, the supposed $10M median valuation is not accurate.