In an era of endless innovation and constant disruption, what is any company really worth? How does a startup determine its valuation?
Sentiment: NEGATIVE
Valuation depends on several factors. From an investor angle, they look at leadership position, management, and what the company's offerings are. I think these three things got 5/5 for a company like Flipkart, and that is what is driving valuations and growth.
Relative to all the start-ups out there, getting a valuation of $1 billion is rarely accomplished.
I myself saw Yahoo become a $100 billion company and then become a $10 billion company, so you always have to look at valuations with a grain of salt and understand it is a point-in-time measure.
The big value of the founder running the company is really two things: the knowledge and the commitment.
I couldn't have predicted the business would be worth so much. I could see that we would have this sort of market share, but I didn't realise the numbers would be so large.
I think that the failures of Enron and WorldCom and other companies are partially failures of investors to recognize companies that are selling for a thousand times nothing, but chances are they may be worth only that.
At the height of the Enron mania, the company's market value was $65 billion. Once the dust cleared, the final value was $0.
Companies are bought for their revenue, customer base, technology, or people. A few great companies offer all of these, but any valuable business offers one.
Venture capital is about capturing the value between the startup phase and the public company phase.
Valuations are actually quite simple to grasp. A company is only worth what two acquirers are willing to pay for it. Don't you just need to find that one buyer? If there is only one potential company interested in buying your startup, chances are you won't be hearing the word 'billion' in the offer.