
What is Square or any startup really worth? - rfjedwards
http://www.cnbc.com/2015/11/13/square-what-its-really-worth.html
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iaw
There's an inverted Ponzi dynamic to this. In a Ponzi scheme, the earlier gain
the most and the later the least. In this dynamic, the later are guaranteeing
their returns at the expense of the earlier.

It makes sense because of the necessity of these companies to raise capital,
but it also has a somewhat ironic tinge.

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franbulax
It is worth what someone is willing to pay for it. The correct question is:
under what conditions is it worth it? Many valuations seem to rely on investor
N+1 being even more gullible than investor N.

You can't defy gravity though; eventually someone is going to want to get a
dividend. It must be more profitable to own shares in a firm than to not once
the chain of fools has run out.

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rdl
I'm confused here -- the argument is that a ratchet which is clearly going to
trigger in the IPO is better for employees and other shareholders than a down
round? Assuming the odds of IPO are 100%, and if we could assume the down
round would be at the same price as the effective price due to ratchet, is
there a difference?

I guess there might be other provisions in earlier rounds of equity which
would be triggered by a down round vs ratchet in IPO, but is this mainly a
distinction of optics?

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loginusername
Must answer question: Worth to whom?

Not every potential buyer will agree on the "worth" of X.

Ultimately X is not worth anything unless and until X is sold.

Perhaps the tense is wrong.

Not what _is_ X worth, but what _will be_ the worth of X (when X is sold).

In the end, "worth" is "price paid" (by some buyer).

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ragnarok451
That's true, but what I think they generally refer to is the price the market
would pay (that is, the price/share where demand for a share will equal the
supply).

You are correct that "X is not worth anything unless and until X is sold" \-
that is why they are saying that IPOs may be lower than expected for these
huge valuations - because the equilibrium market price is believed to be lower
than the current valuations, priced by a small market of investors. According
to the efficient market hypothesis stocks on the stock market will trade at
their fair value (that's pretty disputed, but a good amount of respected
people agree with it).

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puredemo
Whatever it is acquired for. ;)

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dang
Url changed from [https://recode.net/2015/11/13/how-startups-ratchet-up-
their-...](https://recode.net/2015/11/13/how-startups-ratchet-up-their-
valuation/), which points to this.

