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Comment by snowwolf | Hacker News Reader

I still don't understand why tech media (and the rest of the industry) are still not calling out these silly valuations for what they are - marketing spin.

With term sheets the way they are with liquidity preferences if I as a VC invest $100 million in a startup for a 10% stake at a 1X liquidity pref, the valuation I'm placing on that startup is $100 million and that is therefore what its reported valuation should be.

No need for any repricing of these startups - just report their true valuation as largest amount invested with liquidity preferences.

Edit: Just an additional point to add - If I really valued it at $1 billion I wouldn't need the liquidity preference.

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I think it all started with Facebook. TechCrunch was reporting every 2 weeks on how Facebook's valuation grew another $5 million. What kind of "news" is that, unless you want to profit from the extra hype of Facebook's valuation?!

Many people got very rich from Facebook gaining such high valuation before IPO. And now many other VCs want to replicate that kind of sort of almost ponzi-scheme type of investment.

Meanwhile, Facebook's profitability is still less than a percentage point of its valuation!

Literally Ponzi. It's only an anecdote, but I found this one interesting, from a physicist talking about a startup whose key innovation literally defied physics (recharging batteries via ultrasound): http://su3su2u1.tumblr.com/post/129385764803/conversation-wi...

> I reached out to an investor in impossible startup I had talked about previously. Had a long phone call today, in which he explained to me he didn’t invest because he thought they’d ever be a viable business. He invested because he thought between their pitch/charisma and the names of the investors backing them they’d be able to get several rounds of funding, and he’d be able to cash out.

That is: there's so much VC money sloshing around that hoping for a Greater Fool literally counts as a business strategy.

classic- 'hoping for a Greater Fool literally counts as a business strategy'

So that's why VCs invest in uBeam. Some of us here were wondering about that every time the company hits the news. Thanks!

I found that best indicator of such schemes is when their only achievement is a celebrity team backed by celebrity investors. while both are good for raising awareness of the cause, if traction data is missing, I stop reading, mentally flag it, and move on.

This. Private market "valuations" are mostly BS. And for this exact same reason we see some companies delay their IPOs because then their real public-market valuation would come out.

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