Comment on Absurdly High ValuationsparentComments−mrtron12yMost people own a fraction of their home, and hold a mortgage that is largely backed by the value of the home.−staunch12yWhen you buy a house you agree to pay 100% of the agreed upon valuation. Investors in Snapchat are only buying a few percent at this valuation.This is what it looks like to me:Step 1) Buy 30% of a company at a $5 million valuation.Step 2) Buy (or hopefully convince dumber investors to buy) 5% at a $3 billion valuation.Step 3) Tell Yahoo to acquire you for at least $5 billion since your last raise was at $3 billion and you want your dumb investors to be happy.Step 4) Cash your billion dollar check.
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Most people own a fraction of their home, and hold a mortgage that is largely backed by the value of the home.
When you buy a house you agree to pay 100% of the agreed upon valuation. Investors in Snapchat are only buying a few percent at this valuation.
This is what it looks like to me:
Step 1) Buy 30% of a company at a $5 million valuation.
Step 2) Buy (or hopefully convince dumber investors to buy) 5% at a $3 billion valuation.
Step 3) Tell Yahoo to acquire you for at least $5 billion since your last raise was at $3 billion and you want your dumb investors to be happy.
Step 4) Cash your billion dollar check.