Disruptions: With No Revenue, an Illusion of Value

Re:Disruptions: With No Revenue, an Illusion of Value by tomasien on Sunday April 29, 2012 @02:33PM (#3906617)

I'm sorry, but this is just ridiculous. It seems to completely misunderstand the nature of "venture" capital: (potential value + progress toward that value) x risk = valuation. 40 mm users and growing for Instagram (the example du jour) WITH revenue model would have been worth 2-5 billion, but since they weren't making money, they sold for 1.

Come on NYT!

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Re:Disruptions: With No Revenue, an Illusion of Value by ontoillogical on Sunday April 29, 2012 @04:28PM (#3906976)

You're saying that if Instagram had a revenue model, each user would be worth on average between $50 and $125?

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Re:Disruptions: With No Revenue, an Illusion of Value by tomasien on Sunday May 06, 2012 @04:23PM (#3936205)

Let's pretend they can only monetize per user what Facebook can. With only 40mm users, that'd be $100 million in revenue per year. However, their user count is continuing to explode, and could easily be 100mm in the next 18 months. At $10 per user, $1,000,000,000 revenue per year represents a market cap WELL in excess of 5 billion. No doubt.

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Re:Disruptions: With No Revenue, an Illusion of Value by dasil003 on Sunday April 29, 2012 @05:41PM (#3907224)

Where'd you get that formula?

In all likelihood there is an inverse relationship between revenues and user count.

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Re:Disruptions: With No Revenue, an Illusion of Value by tomasien on Sunday May 06, 2012 @04:24PM (#3936209)

Dealing with this stuff on a daily basis, talking to VC's and PE traders. That seems to be how they think about it.

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