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SBF
@SBF_FTX
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@SBF_FTX
18) The $12B from AVAX is only sustained if AVAX continues to perform well. Kinda like Coinbase's market cap. So I think that it should be compared to $50B, not $6B.
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SBF
@SBF_FTX
19) But, responds Avalanche, what if we kept doing what we did last year -- kept minting tokens? And the problem is: doing that would devalue AVAX and those future tokens.
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SBF
@SBF_FTX
20) And, Weird Trick #3: Projections. If a company is new, its revenue probably isn't mature. So how do you value it, if you expect growth? Well, you project out its future revenue, of course!
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SBF
@SBF_FTX
21) Where, here, "you" means "the company", and "project" means "create an excel spreadsheet with large growing numbers". You'd be surprised how many companies are already valued off of their 2025 revenue!
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SBF
@SBF_FTX
1) BAKKT is about to go public. There are a number of "interesting" things in their deck. sec.gov/Archives/edgar
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SBF
@SBF_FTX
22) Alright, so back to the original question: How are raise valuations _actually_ determined? In some sense, you take 20 * (projected annual revenue - projected annual expenses). But there's as much art as science in determining those.
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SBF
@SBF_FTX
23) And so, in practice, you see a tug of war. The company paints itself in the best light it can, making liberal use of dubiously recurring revenue and 2025 projections. The investors, in turn... absolutely shit on the company.
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SBF
@SBF_FTX
25) Of course, as soon as the investment closes, their tune changes, and your company is grossly undervalued according to them; they're now _actually_ on your side! Or maybe, none of this matters. Maybe each VC firm *has* to invest in at least one crypto company this year.
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SBF
@SBF_FTX
26) If they don't, their investors complain. If the company's valuation is less than $1b, they can't invest $100m. If the company's valuatoin is more than $10b, they have to justify it to their investors. Alright, fine, $4b valuation for everyone!
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