i would assume investors giving billions of dollars have done their due diligence and not base it off vibes...
When one is under the grip of irrational exuberance and FOMO due diligence goes out the window.
For example look at Sequoia’s investment into FTX and article about Sam that accompanied.
If for no other reason than they would rather spend their days procrastinating on everything else, so they can obsess over some of the most interesting numbers they will ever see.
ARR seems like a interesting concept which hides away the concrete details and is counting on a futuristic possible commitment especially for companies at this early stages. The crucial detail is probably the money being spent, that is what is fueling this sale of equity at this point.
Yes, it is a meaningful financial measure of actual progress, exactly where progress is most needed for a new company.
> which hides away the concrete details
A normal metric isn't a magic trick. It's just the number it is.
> The crucial detail is probably the money being spent
Accelerating (not just fast) revenue growth at an astounding rate, with absolute numbers that are enormous for a new company, bonkers for a 2500 employee startup [0], is the crucial "detail".
There are lots of companies with deep pockets and compute, making great AI efforts with teams of smart people, that would love to be doing, but are not doing, what Anthropic is doing and doing well. That might be the second crucial detail.
ARR as a number for steady business or public company is much simpler, ARR for companies at this early stage fueled by the motivation for IPO is more than just a number. Its an attempt to convince the market for a certain outcome without revealing the books
> Accelerating (not just fast) revenue growth at an astounding rate
This acceleration is fueled by somewhat artificial demand (AI mandates by executives across the board, still figuring out the realistic use cases) and subsidized pricing. The expenses matter cause they are the ones which are going to dictate if the business is sustainable or not.
Of course ARR is simpler for less dynamic companies. Tautology.
Of course a PR is a communication to the market. Also a tautology.
You are framing functional numbers and behavior as fraudulent because... a newsy PR isn't a formal disclosure?
Cynicism is fine. However: accusations should reference some evidence, not just distrust.
If you think investment banks will catch them during the IPO: They have launched many overpriced IPOs in 1999/2000 and also want a high IPO price.
Historically, listing rules asked: "How much money did you make last year, and do you fit our standard corporate governance box?"
Today, NASDAQ's rules ask: "Do you have the massive market capitalisation, sufficient institutional public float, and transparent liquidity to ensure fair and orderly trading?"
Here are the obvious ones:
1. Free float - Every company that intended to list was required to have at least 20% free float.
2. Index weights were based on the free float.
3. Time before inclusion into the Indices (min 12 months) now 15 trading days
4. Lockup period - minimum 12 months up to 24 months - not 180 days.
I wish people would understand that if America had a functioning criminal justice system, no one would have heard Elon Musk nor Donald Trump.
"The passive funds holding trillions of dollars of 401(k)s and other investments are rushing to change their rules as the IPOs of SpaceX, OpenAI and Anthropic draw closer."
Those index providers are the same interest class with VCs. With such moves they inflate demand post-IPO (hoping it holds for 180+ days), but also allows them to lure buyers in private secondary market and offload that shit pre-IPO.
https://www.wsj.com/finance/stocks/stock-indexes-are-contort...
Not to mention even a total shitshow from an obvious crackpot like Theranos got $1.2 billion total funding, and a 9B valuation. Or FTX.