3 ms·

How to lie with statistics for fun and profit!

by franktankbank 2y ago

consumer451 2y ago
Is this inaccurate? How so? I am genuinely curious.
- toomuchtodo 2y ago
  Not OP, but these valuations are mostly fictional until grounded in material liquidity events (which is not "founder friendly firm throws some coins in to say it is a unicorn to create fomo and sentiment momentum to pump and dump"). This is PR, not objective measurements against an agreed upon rubric or success criteria.
  - cjbenedikt 2y ago
    And you know that for a fact because....source?
    - toomuchtodo 2y ago
      https://www.bloomberg.com/news/articles/2025-02-14/silicon-valley-unicorn-startups-are-desperate-for-cash https://www.bloomberg.com/news/articles/2025-02-14/silicon-v... | https://archive.today/2ilKP https://archive.today/2ilKP > Deep-pocketed investment companies, including private equity firms, may buy some of these slow-growing startups. But businesses are simply “not going to fetch the type of valuations investors were giving them back in 2021,” says Chelsea Stoner, general partner at Battery Ventures, which invests in and acquires startups. > The remaining optimists can hope that something will spark a new round of techno-enthusiasm, or that a Lina Khan-less Trump administration will goose the acquisition and IPO markets. But Greg Martin, founder and managing director at Archer Venture Capital, says that for many unicorns the only—albeit unlikely—hope is for the market to go crazy again. “Unless we have another irrational valuation environment created by zero interest rates” like we had in the pandemic, he says, many of these zombie unicorns are “going to wind up in the graveyard.” https://www.marketsentiment.co/p/the-yc-report https://www.marketsentiment.co/p/the-yc-report > The stark contrast between Y Combinator's private market triumphs and the public market struggles reveals an interesting paradox in the modern tech ecosystem. Private markets can sustain higher valuations based on just potential alone — Investors are willing to bet on visionary ideas and projected growth. But unless you are Tesla, public markets eventually demand tangible results, often leading to painful drawdowns. > This report is by no means meant to throw shade at YC. They have created some incredible companies like Stripe (Fun fact — Stripe now processes more than 1% of the Global GDP!), Airbnb, and Dropbox. > Unfortunately, by the time most of these companies reach the IPO stage, the hype surrounding them pushes them to unsustainable valuations. While this gives a great payout for the initial investors and founders of the company, retail investors frequently find themselves at the short end of the stick when market expectations adjust. (accredited investor, own private equity in multiple orgs, participate in tender offers, etc; thoughts, opinions, musings my own)
  - consumer451 2y ago
    If unicorn valuation is just PR, then what is a better measurement of a company's worth, which is widely available and accepted? If that measurement is used, does it negate the thrust of TFA?
    - toomuchtodo 2y ago
      Revenue, EBITDA/EBITDA multiples, and/or discounted cashflow. Valuations were potentially useful during ZIRP when capital was chasing any yield it could (lottery tickets), but in "higher for longer" interest rate macros, cashflow and profits are king (versus capital furnaces promising future profitability with no proof that event will ever arrive). If you're not yet profitable, you're not a business, you're an experiment not yet proven (which is fine, that's the whole point of being a startup). The valuation is based on hope otherwise.
      - consumer451 2y ago
        OK, agreed on most of that. > If that measurement is used, does it negate the thrust of TFA? How about this part? Is there any reason to think that it would?
        toomuchtodo 2y ago
        The article is basically arguing "immigrant founders good because look at all of these fictitious valuation companies they start and run." Whether you agree with this will be a function of your belief in the data on the topic. The data overwhelmingly shows these valuations are propped up by the VC ecosystem for self interested reasons (greater fool theory), and are not valuations grounded in commonly agreed upon financial fundamentals (and the benefits of these enterprises are tenuous at best), so the appeal to emotion is not effective (in my opinion). https://www.sfgate.com/tech/article/bay-area-venture-capital-bleeding-cash-laffont-19929955.php https://www.sfgate.com/tech/article/bay-area-venture-capital... ”In God we trust. All others must bring data.”
        consumer451 2y ago

How to lie with statistics for fun and profit!

consumer451 2y ago

Is this inaccurate? How so? I am genuinely curious.

toomuchtodo 2y ago
Not OP, but these valuations are mostly fictional until grounded in material liquidity events (which is not "founder friendly firm throws some coins in to say it is a unicorn to create fomo and sentiment momentum to pump and dump"). This is PR, not objective measurements against an agreed upon rubric or success criteria.
- cjbenedikt 2y ago
  And you know that for a fact because....source?
  - toomuchtodo 2y ago
    https://www.bloomberg.com/news/articles/2025-02-14/silicon-valley-unicorn-startups-are-desperate-for-cash https://www.bloomberg.com/news/articles/2025-02-14/silicon-v... | https://archive.today/2ilKP https://archive.today/2ilKP > Deep-pocketed investment companies, including private equity firms, may buy some of these slow-growing startups. But businesses are simply “not going to fetch the type of valuations investors were giving them back in 2021,” says Chelsea Stoner, general partner at Battery Ventures, which invests in and acquires startups. > The remaining optimists can hope that something will spark a new round of techno-enthusiasm, or that a Lina Khan-less Trump administration will goose the acquisition and IPO markets. But Greg Martin, founder and managing director at Archer Venture Capital, says that for many unicorns the only—albeit unlikely—hope is for the market to go crazy again. “Unless we have another irrational valuation environment created by zero interest rates” like we had in the pandemic, he says, many of these zombie unicorns are “going to wind up in the graveyard.” https://www.marketsentiment.co/p/the-yc-report https://www.marketsentiment.co/p/the-yc-report > The stark contrast between Y Combinator's private market triumphs and the public market struggles reveals an interesting paradox in the modern tech ecosystem. Private markets can sustain higher valuations based on just potential alone — Investors are willing to bet on visionary ideas and projected growth. But unless you are Tesla, public markets eventually demand tangible results, often leading to painful drawdowns. > This report is by no means meant to throw shade at YC. They have created some incredible companies like Stripe (Fun fact — Stripe now processes more than 1% of the Global GDP!), Airbnb, and Dropbox. > Unfortunately, by the time most of these companies reach the IPO stage, the hype surrounding them pushes them to unsustainable valuations. While this gives a great payout for the initial investors and founders of the company, retail investors frequently find themselves at the short end of the stick when market expectations adjust. (accredited investor, own private equity in multiple orgs, participate in tender offers, etc; thoughts, opinions, musings my own)
- consumer451 2y ago
  If unicorn valuation is just PR, then what is a better measurement of a company's worth, which is widely available and accepted? If that measurement is used, does it negate the thrust of TFA?
  - toomuchtodo 2y ago
    Revenue, EBITDA/EBITDA multiples, and/or discounted cashflow. Valuations were potentially useful during ZIRP when capital was chasing any yield it could (lottery tickets), but in "higher for longer" interest rate macros, cashflow and profits are king (versus capital furnaces promising future profitability with no proof that event will ever arrive). If you're not yet profitable, you're not a business, you're an experiment not yet proven (which is fine, that's the whole point of being a startup). The valuation is based on hope otherwise.
    - consumer451 2y ago
      OK, agreed on most of that. > If that measurement is used, does it negate the thrust of TFA? How about this part? Is there any reason to think that it would?
      - toomuchtodo 2y ago
        The article is basically arguing "immigrant founders good because look at all of these fictitious valuation companies they start and run." Whether you agree with this will be a function of your belief in the data on the topic. The data overwhelmingly shows these valuations are propped up by the VC ecosystem for self interested reasons (greater fool theory), and are not valuations grounded in commonly agreed upon financial fundamentals (and the benefits of these enterprises are tenuous at best), so the appeal to emotion is not effective (in my opinion). https://www.sfgate.com/tech/article/bay-area-venture-capital-bleeding-cash-laffont-19929955.php https://www.sfgate.com/tech/article/bay-area-venture-capital... ”In God we trust. All others must bring data.”
        consumer451 2y ago