I honestly wonder how they come up with these numbers.
Let's compare that to recent IPO darling Nutanix. Nutanix had revenue of approximately $241 million and was valued at north of 2 billion. So that's approximately 10 dollars of worth for every dollar of revenue. If you were to use the same ratio, then it would be suggested that snapchat's valuation is approximately 3.7 billion dollars.
There are also LOTS of factors such as is the company profitable, what do their margins look like, what does future growth look like (as often share price is also dependent on growth expectations), etc. My understanding is they were anticipating just shy of a billion in revenue in 2017 (which is ~ 300% growth (which is pretty remarkable at this size). Anyways, that's how some of these numbers come to be. (edit: spelling)
http://seekingalpha.com/symbol/TWTR
http://seekingalpha.com/symbol/ZNGA
Cherry-picking isn't that hard. Plus, when DHH wrote that post, Facebook was a totally different company. They only really started justifying their valuation in 2013, after they got lucky with how mobile advertising worked to their advantage.
I don't need to cherry pick because DHH only wrote about 1 company. Also, given that fb is now worth $370B, you could have invested in all four companies and still made a lot of money, which is basically how venture works. You don't expect to make money on most deals, just the occasional amazing one.
And actually, no, DHH wrote about Groupon and Zynga as well: https://signalvnoise.com/posts/3221-and-then-the-music-stopp...
As for making money in venture, most venture funds lose money, so it clearly doesn't work that well for most investors. As an asset class, VC has failed to consistently deliver returns. Of course, the bottom 95% doesn't get plastered on magazine covers or fêted by the Twitterati, so most people don't know about them.
Of course, this is all wonderful for the consumers - we get VC-subsidized rides and meals. It's just not that great of a deal for the LPs.
Also, I agree that most venture funds, like most startups, are poor investments. If you can't tell which are which, you're going to lose money.
Given how many top venture funds simply invest partners' and partners' friends' capital at this point, most institutional LPs would be best off avoiding venture. The same goes for quant funds - Renaissance Technologies' Medallion Fund has only contained prop money for years.
Or... you know... they started realizing the potential that investors and onlookers felt was inevitable.