Instead value of a company is the perpetual value of the cash flows to the buyer. The problem is for startups we have very little idea what their cash flows will be in the future. Their revenues could be anywhere, we have no idea what their costs will be (how many sales people do you need, how much R&D, etc.), etc. So because of that valuation becomes a very imprecise art.
Outside of the cash flow approach, another approach for valuing a company is to consider future buyers. Suppose you have a magic bean that returns 50 cents each year in perpetuity. However, the magic bean is called MagicBeanAI and since AI is hot you know you can sell that bean for $50 to someone else. In this case you would be willing to buy it for <$50 regardless of MagicBeanAI's cash flows. This is what happens when markets start to behave irrationally. Eventually people realize they don't have any more suckers to sell to and their MagicBeanAIs value goes to almost nothing. This is essentially a market crashl; google "tulip mania" for more examples.
from the article: Petersen told Forbes he expects revenue of $500 million this year, yet that still makes Flexport an underdog. “There are 25 freight forwarders that each do more than $1 billion in revenue a year,” he said.
As an aside, I have pondered the viability of an escrow service aimed specifically at people who want to wager about topics like these.
I see this at verious forums, someone says Company A will be bankrupt in a year and another one says that won't happen. One of them frequently pipes up to say, "I'll bet you $100 that I'm right!"
Yet, nobody ever takes the chance to capitalize on those potential bets.
Basically, they would set their terms, agree on those terms, upload those terms in a verifiable way as the terms they agreed to, pay their money, and then wait for the time period to end.
At that point, someone at the escrow company will review the wager and the evidence and decide who gets the payout, less the fees associated with it. Not all bets are easy to judge, so writing accurate terms would be important. The service will supply, if needed, impartial judging of the merits. I suppose the company would also need to have the ability to refuse to accept certain bets, perhaps insisting that they make the goals clearly articulated and demonstrable success or failures would be important.
They might even enable it for multiple parties. Each bet would require a deposit of the entire amount due. I suppose people could even go so far as to set odds, if they wanted.
I'm pretty sure this should be a thing.
I've never seen a startup valued at this large percentage of market size
please correct me if I'm wrong