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Ive been told about this phenomena from executive types. I've said "no way would someone pay 50M for a company that only generates 1M in profit per year." The

Ive been told about this phenomena from executive types. I've said "no way would someone pay 50M for a company that only generates 1M in profit per year." They responded: "Its not about the profit, its about the potential." Well, the potential could also be calculated, and it still wasnt going to be 50M. They replied: "Sometimes people just want the assets the company has" So its finding a greater fool? Given the rise of Tesla's stock, I'm beginning to trust myself, more than the 'analysts'. People typically arent so outspoken about finding greater fools, but that seems to be the most important thing to get a big valuation.

greenavocado 2y ago
The unspoken/unwritten thing here is that some VC backed businesses like this one are attempting to monopolize entire markets and destroy them to leave behind a highly profitable monopoly or oligopoly. It's a form of warfare where money is used as ammunition. Instead of merit based natural growth there is a full assault on existing market players and it is very costly. Sometimes you won't win the war, as we see here.
sofixa 2y ago
WhatsApp, with 0 revenues and no clear business model was acquired for $19.3 billion (in 2014 US dollars). It had no assets to speak of, just decent market penetration of a cheap and relatively moat-resistant market.
- dietr1ch 2y ago
  The conversation metadata surely has a price for a company factoring in billions in privacy related fines to run their projects
- dietr1ch 2y ago
  Conversation metadata surely has a price to a company factoring in billions in privacy related fines to run their projects
- siva7 2y ago
  > no clear business model Here lies your error. They clearly had a business model worth 19b, just not the traditional one you would expect and it paid out for Meta, saving the company to keep their relevance since the youth doesn't use facebook anymore.
  - mynameisvlad 2y ago
    To be fair, the youth dont use either Instagram or WhatsApp for communication anymore, so it only delayed their irrelevancy.
    - siva7 2y ago
      What do they use instead?
- ignoramous 2y ago
  > [WhatsApp] with 0 revenues and no clear business model That's not true? DigitalTrends lets us in on WhatsApp's business model, said to pull in about $100 million in revenue... https://www.idownloadblog.com/2013/04/07/google-1billion-whatsup/ https://www.idownloadblog.com/2013/04/07/google-1billion-wha... (2013) / https://archive.ph/A9JMN https://archive.ph/A9JMN
kamaal 2y ago
>>"Sometimes people just want the assets the company has" If I take a loan to buy a home, I would be considered to be in debt. In the start up world, if you take money from some one, they think about it as their valuation increasing. This weird word acrobatics is used to take what is a bad condition as something that is awesome. Like Confucius said- "Beginning of wisdom is to call things by their correct names". Call it what it is. Its a debt, and nobody in the history of the world who didn't make money(profits) was able to pay off their debts. One can find a greater fool, and in fact that is exactly what happened in PayTMs case. The VC just recovered their money from retail investors.

greenavocado 2y ago

The unspoken/unwritten thing here is that some VC backed businesses like this one are attempting to monopolize entire markets and destroy them to leave behind a highly profitable monopoly or oligopoly. It's a form of warfare where money is used as ammunition. Instead of merit based natural growth there is a full assault on existing market players and it is very costly. Sometimes you won't win the war, as we see here.

sofixa 2y ago

WhatsApp, with 0 revenues and no clear business model was acquired for $19.3 billion (in 2014 US dollars). It had no assets to speak of, just decent market penetration of a cheap and relatively moat-resistant market.

dietr1ch 2y ago
The conversation metadata surely has a price for a company factoring in billions in privacy related fines to run their projects
dietr1ch 2y ago
Conversation metadata surely has a price to a company factoring in billions in privacy related fines to run their projects
siva7 2y ago
> no clear business model Here lies your error. They clearly had a business model worth 19b, just not the traditional one you would expect and it paid out for Meta, saving the company to keep their relevance since the youth doesn't use facebook anymore.
- mynameisvlad 2y ago
  To be fair, the youth dont use either Instagram or WhatsApp for communication anymore, so it only delayed their irrelevancy.
  - siva7 2y ago
    What do they use instead?
ignoramous 2y ago
> [WhatsApp] with 0 revenues and no clear business model That's not true? DigitalTrends lets us in on WhatsApp's business model, said to pull in about $100 million in revenue... https://www.idownloadblog.com/2013/04/07/google-1billion-whatsup/ https://www.idownloadblog.com/2013/04/07/google-1billion-wha... (2013) / https://archive.ph/A9JMN https://archive.ph/A9JMN

kamaal 2y ago

>>"Sometimes people just want the assets the company has" If I take a loan to buy a home, I would be considered to be in debt. In the start up world, if you take money from some one, they think about it as their valuation increasing. This weird word acrobatics is used to take what is a bad condition as something that is awesome. Like Confucius said- "Beginning of wisdom is to call things by their correct names". Call it what it is. Its a debt, and nobody in the history of the world who didn't make money(profits) was able to pay off their debts. One can find a greater fool, and in fact that is exactly what happened in PayTMs case. The VC just recovered their money from retail investors.