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That's how math works though. If I add $10 to an empty piggy bank, it's worth $10. If my parents pay me $1 in interest on my savings, it's now worth $11. If I
by zacharycohn 4y ago
That's how math works though. If I add $10 to an empty piggy bank, it's worth $10. If my parents pay me $1 in interest on my savings, it's now worth $11. If I add another $2, it's now worth $13.
- hinkley 4y agoAnd what does any of that have to do with venture capital math (other than that both tend to be condescending)? Venture capital math says that if your parents pay you $1 in anticipation of getting to claim 5% of the contents of your piggy bank when you open it, that there are now $20 in the piggy bank.
- doctor_eval 4y agoIn my experience the valuation is the starting point, rather than an extrapolation. During the investment pitch the company might say it will be worth $5 billion based on X Y and Z factors (like growth, market size etc), then they go out and get investors to buy little pieces of it. Note that I'm not trying to say you're wrong. It is bullshit. Rather, I'm saying that the bullshit runs very deep.
- Invictus0 4y agoNo it isn't. Ford has 4 billion shares outstanding. I can place a buy order for Ford at $1,000/share right now: if it's filled at that price, Ford doesn't instantly become a trillion dollar company. Just because you can sell a few shares at a high price doesn't mean someone will buy the rest of the shares at that price. Especially not in illiquid private markets.
- zacharycohn 4y agoWhen you place a buy order, you are buying it from a bank or private seller. Ford got paid a long time ago.