Frankly, it just pisses me off - we're a profitable business which has grown 150% YOY for 6 years, and our value is barely £3M, based on our profits and growth. Why an infant company with little discernable revenue should have an astronomical value is beyond me.

The question is whether Instagram can eventually contribute enough to Facebook's bottom line to justify the $1B valuation. Its current (lack of) revenues obviously don't get it there, but it's the future that matters.

In a bubble (tulips, houses, stock markets) there seems to be an unending supply of greater fools, until all of a sudden there isn't, and someone (who of course expected to find some other fool to sell to) is left picking up the tab for assets which are now close to worthless.

If your valuations are based on what someone else might pay in future, you are speculating, and will be lucky if you manage to get out before other people realise the assets you have bought are not worth $1B or whatever you paid for them. If on the other hand you bought because there is a steady income stream from an investment which will eventually pay off the investment and add returns, and thus underpins the price, you don't have to worry about whether this is a bubble or not.

This has already happened so many times in different markets and the SAME market in the late 90s. I guess it's human nature to just fall in the same trap eventually? Money makes us foolish?

Isn't that what angels and VCs always do then?

Pinterest, Instagram etc will likely never earn enough to pay back their current crazy valuations, so their valuations are the first kind of speculation, not the latter. Personally I feel Facebook is also in this group, and is overvalued right now, given their current and likely future revenue.

Having a £3M business is insanely awesome. If you want an answer to your question about why your business isn't worth $1.5B, please give detials on your business and people will surely tell you.