1 upvotes, 1 direct replies (showing 1)
View submission: Don't invest recklessly
Economically, what you're saying makes little sense. For example, when a startup comes to investors for funding (think Shark Tank), they ask, say, $1M for 20% of the company which gives it a valuation of $5M. According to you, the business isn't worth $5M because investors only gave $1M. You get my point?
Comment by awoeoc at 26/12/2017 at 13:00 UTC
1 upvotes, 1 direct replies
I'm going to go on a limb and guess Shark Tank is the limit of your experience with financing for businesses. I encourage you to watch many seasons of Shark Tank and pay attention to the sharks and take notes, then read books on startup funding and how investments in the space work, particularly with exits and how most investments yield $0 for investors for a total loss of capital (particularly in companies funded pre-revenue).
I actually started a startup and know how funding for companies work.
Notice how they never pull these numbers out of thin air, there's always revenue attach, and the sharks seem to like sticking to a 3x revenue multiple. When you invest in a company you're investing in a revenue stream, a dividend. A typical company is worth 3x revenue (varying upon industry). So when they give $1m for a company for a $5m valuation, they are either giving it to a company with $1.6.million in revenue, or a company with a high potential for revenue growth.
We're seeking VC funding for a series A investment right now at a 5x revenue multiple based on projected future growth. The types of investors we're seeking are also less greedy than the sharks as they very rarely give a 5x multiple valuation on a company (I watch shark tank enough). Meaning if we made $1 last year, we're seeking a $5 valuation, likely giving up 30% equity. So we'll get about $1.5 in funding (so about a year and a half of revenue).
Bitcoin however produced no work, no dividends, no revenue. Bitcoin isn't a company, there's no business model. There's no way to value bitcoin other than "feelings". If you tried valuing bitcoin by a multiple of revenue it'd be worth $0.