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Comment by dude_abides | Hacker News Reader

In comparison,

- Facebook raised $200MM in its Series-D round with DST in 2009, at a valuation of $10B.

- Twitter in 2010, with plateauing growth, raised $200MM (series F), with a valuation of 3.7 B.

Square has strong growth and a proven revenue model and still just got a multiple of 16x. Clearly the market has adjusted its expectations quite a bit. In other words, it is going to be quite hard for a Pinterest to raise money at 1.5B valuation today.

I'm going to have to conclude that reports of another tech bubble burst were quite exaggerated.

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Proven revenue can be counter intuitive when raising money. On the one hand, it makes it much easier to raise. On the other, it's such a solid metric that you can't build a story for investors that gives you insane valuations.

It would not surprise me to see a hot startup with really good traction/growth and a fuzzy but credible "here's how we make money" raise at another crazy valuation soon. If you can paint a picture of a huge market, show impressive ownership of that market, you can let investors use their imaginations from there.

Agree with you that proven revenue model doesn't help create growth multiples.

But in Square's case, the story for investors would likely have been: here's ways x, y, z, in which we can make money, and even in case none of these works, here's our proven revenue model.

IMHO, a comparison with other B2B/sales-driven startups would reflect the reality better - e.g. Yammer. Pinterest is more on the Twitter league (B2C, growth-driven), where it seems that the average valuation is much higher...

Square has strong growth and a proven revenue model and still [just] got a multiple of [16x]

--worth putting this in context: 16x is 1.6x of 10x

http://abovethecrowd.com/2011/05/24/all-revenue-is-not-creat...

Square is also facing:

-- Massive entrenched competition, that is highly profitable; -- A politically shielded oligopoly with global political reach

Unlike FB, twitter, etc which are genuinely new ideas to which that have had unique first mover advantages.

cough MySpace cough

ha ha good point, but proving the larger one...even the 10x first-first movers have risk of loss (or $560m to 50m if you are myspace =D)

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