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"In contrast with the scenario in 2000, most of today’s tech companies are real businesses." I disagree that many startups have viable ideas that will generate
by acd 4y ago
"In contrast with the scenario in 2000, most of today’s tech companies are real businesses."
I disagree that many startups have viable ideas that will generate black numbers and organic growth.
Bold founders have sold startup ideas which are not sustainable.
Ie investment capital have prefered bold founders that could give vision of high future returns wework for example.
A small number of startups will become awesome but the majority wont.
Zero interest rates was a money rocket that fueled startups going to the sky. But what goes up usually comes down eventually with gravity/interest rates.
A small fraction of startups will become super sucessfull but the majority wont. The number of sucessfull probably follows some kind of statistical distribution of which startups is great vs bad.
Higher interest rates will adjust future return calculations that is brilliant from the article!
- fauigerzigerk 4y ago>Higher interest rates will adjust future return calculations that is brilliant from the article! I think discounted future cashflow is unfit for purpose as a valuation metric in an inflationary environment. It is based on the assumption that interest rates and future cash flows are independent variables. They are not. There's no dispute that the present value of a given amount of future cashflow is lower when interest rates are higher. This part is correct. It's simple arithmetic. However, when interest rates rise because inflation rises, it means that future cash flows rise as well, because future cash flows are linked to future revenues, and future revenues, by definition, grow with inflation.