
Squaring Venture Capital Valuations with Reality - urish
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2955455
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urish
tl;dr by Laura Norén (@digitalFlaneuse on twitter):

Stanford professor, Ilya Strebulaev, and Will Gornall of the University of
British Columbia recalculated the valuation of 100+ companies known as
unicorns (startups valued at $1bn +) and showed many aren't worth nearly as
much as they claim. Why? Because math. Startups typically issue different
classes of stock in each fundraising round but their valuations are
oversimplified by applying the price of the most recent round to all
outstanding shares. _Every_ company they looked at was overvalued, 53 lost
their $1bn unicorn status, and 13 were overvalued by more than 100 percent.
... "Some unicorns have made such generous promises to their preferred
shareholders that their common shares are nearly worthless," the two
professors wrote. In my opinion, this is an example of two things 1) lots of
people cannot apply their math skillz and 2) the ethos of finance contains
much magical thinking. The entire industry is obsessed with unicorns.
According to Scottish myth, unicorns were ruthlessly hounded by clamoring
hoards, simultaneously scapegoated for being the aberrant creatures they are
and loved to death (e.g. abused, fatally) for their magical powers. Lesson:
it's clear that many in finance are not good at applying their history and
culture skillz, either.

