Hacker News Reader

Comment by bosdev | Hacker News Reader

Raising $100M at a $25B valuation means someone paid $100M for a .4% stake in AirBnB, which is both surprising and amazing to me. This does ignore whatever preference and specialized terms the stakeholders were given. And of course, the buyers aren't necessarily saying they think the company is worth $25B, they are saying they believe the market will value it at more than $25B at some point in the future.

View on HN

Your last statement is not necessarily true.

That's the funny thing about startup valuations; they are not an apples-to-apples comparison to a public market. In fact, a savvy investor may be willing to invest $100M at a $25B valuation knowing full well there will never be a liquidation event worth $25B. It all depends on the deal terms (preferences, ratchets, etc.).

It's entirely rational to invest $XM at $YB valuation when your deal terms stipulate a minimum return of ($XM * 1.25), regardless of valuation.

Which leads to the conclusion that without knowledge of the terms of the deal it is a bit of a weird thing to value the entire company based on that deal. Because such a deal should be discounted based on the terms not applying equally to the rest of the shares already created.

"AirBnB raises $100m which gives them an unknown valuation due to the complex financial terms of the deal" just doesn't draw as many clicks on your story

My first reaction was the 37signals prank a few years ago:

PRESS RELEASE: 37SIGNALS VALUATION TOPS $100 BILLION AFTER BOLD VC INVESTMENT [1]

1: https://signalvnoise.com/posts/1941-press-release-37signals-...

Reply on news.ycombinator.com