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In comparison, - Facebook raised $200MM in its Series-D round with DST in 2009, at a valuation of $10B. - Twitter in 2010, with plateauing growth, raised $200

In comparison, - Facebook raised $200MM in its Series-D round with DST in 2009, at a valuation of $10B. - Twitter in 2010, with plateauing growth, raised $200MM (series F), with a valuation of 3.7 B. Square has strong growth and a proven revenue model and still just got a multiple of 16x. Clearly the market has adjusted its expectations quite a bit. In other words, it is going to be quite hard for a Pinterest to raise money at 1.5B valuation today. I'm going to have to conclude that reports of another tech bubble burst were quite exaggerated.

mrkurt 14y ago
Proven revenue can be counter intuitive when raising money. On the one hand, it makes it much easier to raise. On the other, it's such a solid metric that you can't build a story for investors that gives you insane valuations. It would not surprise me to see a hot startup with really good traction/growth and a fuzzy but credible "here's how we make money" raise at another crazy valuation soon. If you can paint a picture of a huge market, show impressive ownership of that market, you can let investors use their imaginations from there.
- dude_abides 14y ago
  Agree with you that proven revenue model doesn't help create growth multiples. But in Square's case, the story for investors would likely have been: here's ways x, y, z, in which we can make money, and even in case none of these works, here's our proven revenue model.
herval 14y ago
IMHO, a comparison with other B2B/sales-driven startups would reflect the reality better - e.g. Yammer. Pinterest is more on the Twitter league (B2C, growth-driven), where it seems that the average valuation is much higher...
001sky 14y ago
Square has strong growth and a proven revenue model and still [just] got a multiple of [16x] --worth putting this in context: 16x is 1.6x of 10x http://abovethecrowd.com/2011/05/24/all-revenue-is-not-created-equal-the-keys-to-the-10x-revenue-club/ http://abovethecrowd.com/2011/05/24/all-revenue-is-not-creat... Square is also facing: -- Massive entrenched competition, that is highly profitable; -- A politically shielded oligopoly with global political reach Unlike FB, twitter, etc which are genuinely new ideas to which that have had unique first mover advantages.
- nopassrecover 14y ago
  cough MySpace cough
  - 001sky 14y ago
    ha ha good point, but proving the larger one...even the 10x first-first movers have risk of loss (or $560m to 50m if you are myspace =D)

mrkurt 14y ago

Proven revenue can be counter intuitive when raising money. On the one hand, it makes it much easier to raise. On the other, it's such a solid metric that you can't build a story for investors that gives you insane valuations. It would not surprise me to see a hot startup with really good traction/growth and a fuzzy but credible "here's how we make money" raise at another crazy valuation soon. If you can paint a picture of a huge market, show impressive ownership of that market, you can let investors use their imaginations from there.

dude_abides 14y ago
Agree with you that proven revenue model doesn't help create growth multiples. But in Square's case, the story for investors would likely have been: here's ways x, y, z, in which we can make money, and even in case none of these works, here's our proven revenue model.

herval 14y ago

IMHO, a comparison with other B2B/sales-driven startups would reflect the reality better - e.g. Yammer. Pinterest is more on the Twitter league (B2C, growth-driven), where it seems that the average valuation is much higher...

001sky 14y ago

Square has strong growth and a proven revenue model and still [just] got a multiple of [16x] --worth putting this in context: 16x is 1.6x of 10x http://abovethecrowd.com/2011/05/24/all-revenue-is-not-created-equal-the-keys-to-the-10x-revenue-club/ http://abovethecrowd.com/2011/05/24/all-revenue-is-not-creat... Square is also facing: -- Massive entrenched competition, that is highly profitable; -- A politically shielded oligopoly with global political reach Unlike FB, twitter, etc which are genuinely new ideas to which that have had unique first mover advantages.

nopassrecover 14y ago
cough MySpace cough
- 001sky 14y ago
  ha ha good point, but proving the larger one...even the 10x first-first movers have risk of loss (or $560m to 50m if you are myspace =D)