Published On: Fri, May 22nd, 2020

Beware mega-unicorn paper valuations

Hello and welcome behind to a unchanging morning demeanour during private companies, open markets and a gray space in between.

There’s a famous aged post going around Twitter this week by businessman and developer David Heinemeier Hansson (@DHH). DHH is a censor of certain elements of a startup world, generally furious valuations. This entrance from him is, in my view, a classical of a genre.

The post in doubt is patrician “Facebook is not value $33,000,000,000,” and was created behind in 2010.

You can already suppose who competence find a post grievous — namely folks who are in a business of putting collateral into high-growth companies. This arrange of snark, yet not precisely recent, is a good instance of how posts like a Facebook entrance are review on Twitter.

If we take a impulse to indeed review DHH’s blog, however, you’ll find that a initial partial of his evidence is that offered a notation cut of a association during a high price, so “revaluing” a association during a new, stratospheric valuation, is a small silly. DHH didn’t like that by offered a few commission points of itself, Facebook’s value was pegged during $33 billion. We’ve seen some similarly-small-dollar, high-valuation rounds recently that could be scooted into a same bucket.

It’s a rather satisfactory point.

But what struck me this morning while re-reading a DHH square was that his second dual points are useful rubrics for framing a modern, post-unicorn era. DHH wrote that increase matter, companies are eventually valued on them, and that companies that don’t scale financial formula as they supplement business (or users) aren’t great.

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