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Off topic, but people need to stop saying that it's an "$X billion startup" as if it's a real thing. It's not. It's just a private valuation on a piece of pape
by spaceman_2020 4y ago
Off topic, but people need to stop saying that it's an "$X billion startup" as if it's a real thing.
It's not. It's just a private valuation on a piece of paper, not real money you can readily exchange for real cash.
- snake_doc 4y agoThe company did receive real cash priced at the valuation. That’s how the valuation came to be, at its last capital fundraising round.
- gbourne 4y agoIt is the same as public markets, but just on a smaller scale. Instead of millions owning a % for $X, you have a few individuals/firms who agree % for $X. And you (the company) can exchange - tender offers, private sales, etc.
- ycombobreaker 4y agoThe same... with no public scrutiny, last trade price most likely reflecting a primary sale (i e. the market only contains buyers), and very few sample points overall. That's not the same confidence of price, even if the structure is analagous.
- yellowstuff 4y ago"Structuring" makes a huge difference. VCs will invest $10mm for 10% of a company, making it apparently "worth" $100mm. However, they will get guarantees such as a right to the first 30% of profit before any other investors get paid back. It's not straightforward to know precisely how deals like that that translate into the final value of the company, but it's a guarantee that it's less than $100 mm, and with harsh enough structuring the actual value of the company could be closer to $10 mm.
- spaceman_2020 4y agoPublic markets at least have some degree of liquidity. You can turn that paper into cash if you wanted to.