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This is getting out of hand. They had a pop-culture bump a few months ago, but are down since then. A $4B valuation with 'speculation / risk built in' means t

This is getting out of hand. They had a pop-culture bump a few months ago, but are down since then. A $4B valuation with 'speculation / risk built in' means they really think it's worth $20-50B. FYI to those commenting that Twitter/FB will have the same features, I don't believe that this is the threat, as the specific nature of the experience matters as well as even the brand etc.. The 'risk' for Clubhouse is merely that the experience doesn't scale and is not interesting to most people, which I think will be the case. The number of this-is-how-I-got-rich-you-can-too rooms is just far too much. The most important limitation I see is that the ephemeral nature of the content means we can't 'let the good stuff come to the top' meaning - you have to sit and slog through the audio yourself to get to the nuggets. TikTok 'works' because they quickly move the uninteresting stuff to the background. And of course, without serious monetization, the big names who draw crowds will stay away, although that could change. This is short term but worth a look [1] [1] https://trends.google.com/trends/explore?geo=US&q=clubhouse https://trends.google.com/trends/explore?geo=US&q=clubhouse

villasv 6y ago
> A $4B valuation with 'speculation / risk built in' means they really think it's worth $20-50B. I may be out of the loop, but that's not* how I learned to valuate startups. On the contrary, the VC valuation I learned to calculate was usually a bit higher than expected market value.
- jollybean 6y ago
  Yes, the 'market value' would also include the risk profile. Crudely, if there's a 75% chance something goes bust, then the value is only 25% of what it would be if it was going to be 100% successful. For growth companies, the likelihood of failure tends to be lower, but this company is in many ways still at 'seed stage' dynamics with no established base, business plan, revenue, still in a closed beta etc. etc. and a high likelihood of failing.
  - villasv 6y ago
    The rationale goes in the opposite direction. If investors led a funding round at a valuation of 4 Bn, that's already how much they think it's worth it and, in most cases, its market value is a bit less.
    - jollybean 6y ago
      Yes, obviously 'they think it's worth that' in present terms because that's why they are investing in it at that amount. They're not going to invest at some number largely different from 'what they believe it's worth'. But your statement misses my implication that the risk profile is 'out of sync' for this kind of investment, at this stage. Normally, when companies get into the 'multibillion dollar range' - they have established business operations and they can make crude, ballpark assessments with respect to outcomes. Companies with multi-billion dollar valuation tend not to fail - so the 'valuation' process would be a calculation of 'present value of cash flows' for the giant market the company is in, what the market will bear etc.. It's a giant guess, but an informed one. Clubhouse is at 'seed stage' in terms of operations - this means, that unlike regular B-round companies with $4B valuations - they're still a total crapshoot. Stripe, when it was at $4B had a growing business. Clubhouse has mostly just a lot of hype, no revenues, no business model, no celebrity backing, and I'm going to imagine not much of a daily-active user base. (Obviously AZ has access to internal metrics and we don't know what those are). So when you consider Stripe at $4B valuation has a 90% chance of surviving as a business, and Clubhouse at $4B probably a 33% chance of surviving as a business - that says a lot. It effectively means that before the failure risk adjustment, the belief is that Clubhouse would be substantially bigger business. At these giant valuations AZ is putting in quite a lot of money, they actually cannot afford to take risks that big, there's some weird dynamics going on with this. There's definitely a 'new game' being played with monster valuations that's a crazy poker hand with a lot of chips in the pile.
      - villasv 6y ago
        I understand your viewpoint, I'm just saying that's not how VCs take valuations. It's a 4 bn business, its chance of survival taken into account - which at this point, a16z thinks is pretty high, not <50%. This confidence is probably what rose it from its previous 1 bn valuation.
bob33212 6y ago
This is just VCs trying to corner the market on promising startups. If A16Z takes 20%+ ownership in all reasonable startups even at high prices they may still come out ahead when one of those is the next FB. They are blocking smaller VCs out of the market, rather than thinking clubhouse will specifically become profitable.
SuoDuanDao 6y ago
As a counterpoint, quite often when there's an algorithm that lets the uninteresting stuff fade to the background, the really interesting stuff that's incomprehensible to most people but at the edge of a few interested people's cognitive ability gets caught up in the filter. I have no firsthand experience of Clubhouse, but what I understand is that it's a 'follower' model, in which you have to decide how willing you are to miss out on what Celebrity X has to say. That would make for a pretty good approimation of a bayesian algorithm in which everyone decides for themselves how important everyone else's opinion is, which could actually work better than a lot of the competing algos.

villasv 6y ago

> A $4B valuation with 'speculation / risk built in' means they really think it's worth $20-50B. I may be out of the loop, but that's not* how I learned to valuate startups. On the contrary, the VC valuation I learned to calculate was usually a bit higher than expected market value.

jollybean 6y ago
Yes, the 'market value' would also include the risk profile. Crudely, if there's a 75% chance something goes bust, then the value is only 25% of what it would be if it was going to be 100% successful. For growth companies, the likelihood of failure tends to be lower, but this company is in many ways still at 'seed stage' dynamics with no established base, business plan, revenue, still in a closed beta etc. etc. and a high likelihood of failing.
- villasv 6y ago
  The rationale goes in the opposite direction. If investors led a funding round at a valuation of 4 Bn, that's already how much they think it's worth it and, in most cases, its market value is a bit less.
  - jollybean 6y ago
    Yes, obviously 'they think it's worth that' in present terms because that's why they are investing in it at that amount. They're not going to invest at some number largely different from 'what they believe it's worth'. But your statement misses my implication that the risk profile is 'out of sync' for this kind of investment, at this stage. Normally, when companies get into the 'multibillion dollar range' - they have established business operations and they can make crude, ballpark assessments with respect to outcomes. Companies with multi-billion dollar valuation tend not to fail - so the 'valuation' process would be a calculation of 'present value of cash flows' for the giant market the company is in, what the market will bear etc.. It's a giant guess, but an informed one. Clubhouse is at 'seed stage' in terms of operations - this means, that unlike regular B-round companies with $4B valuations - they're still a total crapshoot. Stripe, when it was at $4B had a growing business. Clubhouse has mostly just a lot of hype, no revenues, no business model, no celebrity backing, and I'm going to imagine not much of a daily-active user base. (Obviously AZ has access to internal metrics and we don't know what those are). So when you consider Stripe at $4B valuation has a 90% chance of surviving as a business, and Clubhouse at $4B probably a 33% chance of surviving as a business - that says a lot. It effectively means that before the failure risk adjustment, the belief is that Clubhouse would be substantially bigger business. At these giant valuations AZ is putting in quite a lot of money, they actually cannot afford to take risks that big, there's some weird dynamics going on with this. There's definitely a 'new game' being played with monster valuations that's a crazy poker hand with a lot of chips in the pile.
    - villasv 6y ago
      I understand your viewpoint, I'm just saying that's not how VCs take valuations. It's a 4 bn business, its chance of survival taken into account - which at this point, a16z thinks is pretty high, not <50%. This confidence is probably what rose it from its previous 1 bn valuation.

bob33212 6y ago

This is just VCs trying to corner the market on promising startups. If A16Z takes 20%+ ownership in all reasonable startups even at high prices they may still come out ahead when one of those is the next FB. They are blocking smaller VCs out of the market, rather than thinking clubhouse will specifically become profitable.

SuoDuanDao 6y ago

As a counterpoint, quite often when there's an algorithm that lets the uninteresting stuff fade to the background, the really interesting stuff that's incomprehensible to most people but at the edge of a few interested people's cognitive ability gets caught up in the filter. I have no firsthand experience of Clubhouse, but what I understand is that it's a 'follower' model, in which you have to decide how willing you are to miss out on what Celebrity X has to say. That would make for a pretty good approimation of a bayesian algorithm in which everyone decides for themselves how important everyone else's opinion is, which could actually work better than a lot of the competing algos.