Not really. Valuations are base upon the expectation of future cash flows. That boils down to two things- how fast will those cash flows grow, and how much risk

Not really. Valuations are base upon the expectation of future cash flows. That boils down to two things- how fast will those cash flows grow, and how much risk is their in those cash flows. I don't have the energy to figure out the growth rate implied by a 50X multiple on sales, but I can assure you it is astronomical - unreasonably so. But this doesn't mean that a company can't be worth more than its cash flows would indicate. Suppose the existence of a company (lets call it Instagram) threatens lots of cash flow of another company (for arguments' sake, call it Facebook). How much is Instagram worth to Facebook? Instead of using Instagrams cash flow to value the company (easy! zero!). You have to use the incremental (and negative) cashflows of Facebook due to Instagram's existence. If Facebook stands to lose, a few hundred million a year to competition, suddenly, Instagram is very valuable indeed, but only to a small, small number of entities - Facebook, and probably Google. In the end, it's all a speculative judgement call. But don't fall into the trap of evaluating small startups based on their own cash flow. All that said, I agree. 50x is stupid.