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I'm sorry, but this is just ridiculous. It seems to completely misunderstand the nature of "venture" capital: (potential value + progress toward that value) x r
by tomasien 15y ago
I'm sorry, but this is just ridiculous. It seems to completely misunderstand the nature of "venture" capital: (potential value + progress toward that value) x risk = valuation. 40 mm users and growing for Instagram (the example du jour) WITH revenue model would have been worth 2-5 billion, but since they weren't making money, they sold for 1.
Come on NYT!
- ontoillogical 15y agoYou're saying that if Instagram had a revenue model, each user would be worth on average between $50 and $125?
- tomasien 15y agoLet's pretend they can only monetize per user what Facebook can. With only 40mm users, that'd be $100 million in revenue per year. However, their user count is continuing to explode, and could easily be 100mm in the next 18 months. At $10 per user, $1,000,000,000 revenue per year represents a market cap WELL in excess of 5 billion. No doubt.
- dasil003 15y agoWhere'd you get that formula? In all likelihood there is an inverse relationship between revenues and user count.
- tomasien 15y agoDealing with this stuff on a daily basis, talking to VC's and PE traders. That seems to be how they think about it.
- choros12 15y agoBusiness with no revenue sold for 1 billion? This single factor could be a prime example of bubble mentality.