I’m beginning to think it’s almost malpractice of some sort to use valuations for anything other than IRR computations to allow VC firms to have a basis for raising the next fund. A purely technical use case since big returns take the longest to yield and failures are quick.
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If you used real returns, VC investing would be too slow and conservative, so it’s ok to use valuations for that *in a portfolio* but using isolated valuations to valorize pre-exit founders is shady af. Makes failures look like going from billion to zero. No it’s zero to zero.
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Ah got it. Valuations are how startups do virtue signaling
It’s basically BIRGing *average* returns in a power-law sector where *median* returns are more meaningful but far less flattering.Show this thread
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That’s what 409a valuations are supposed to be. So about 10-25% of the venture valuation
Thanks. Twitter will use this to make your timeline better. UndoUndo
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The VC funding is already failure-adjusted. The “risk-adjusted” price for a die-roll where a 1 pays 12:1 and >1 pays zero? Just because it’s high variance doesn’t mean the avg result is meaningless. Unless the firm is overleveraged, but that’s not about the individual bet value.
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Yeah see follow on tweets. I’m objecting to precisely the use of individual valuations to talk about the company rather than the portfolio value of the VC (which is fine)
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