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Because they're comparing to 1999. In 1999 you could get a billion dollar valuation with not much more than a domain name and an idea. Most of those never ende
by austenallred 11y ago
Because they're comparing to 1999.
In 1999 you could get a billion dollar valuation with not much more than a domain name and an idea. Most of those never ended up making any money at all.
Now, OK, valuations may be high, but at least there is cold hard cash involved. There are hundreds of success stories involving cold hard cash, where in 1999 everything evaporated because the whole damn thing was based on smoke and mirrors.
In other words, even if a company earning $10m/year in profit isn't worth $500M, at least they're worth something. Last time they weren't worth anything.
- ericabiz 11y ago"In 1999 you could get a billion dollar valuation with not much more than a domain name and an idea. Most of those never ended up making any money at all." Well, kind of. Having been there, the biggest problem I remember is not that these companies didn't have any revenue, it's that they didn't have any profit. Webvan, Kozmo, Pets.com, etc. had customers. They just lost money on every sale. The problem came when investors stopped funding them to do so, and many of them went out of business literally overnight (like Chuck's comment elsewhere in this thread mentioned.) I would be more worried if Uber, Airbnb, etc. lost money on every sale. It is relatively easier to turn the marketing knob down to $0 spent, if your customers will still continue using your service at that point. I think the fundamentals are better this time around, though I still strongly feel Valley VC's overweight "getting 100% of the available market" and underweight "making money on each sale."
- austenallred 11y agoFair, so swap "they never made any money" to "they never even had a potentially profitable business model"