Valuations usually are calculated in a way to benefit whomever is doing the calculating.
That said, a company is worth whatever someone is willing to pay for it. If Twitter (or anyone) can create the perception that their company is worth x, and then sell it for x, then it really was worth x.
> That said, a company is worth whatever someone is willing to pay for it.
This implies transaction takes place in an efficient market - i.e. bidders have full information about the thing they're buying. Tech start-ups market is quite far from being an efficient market, as we see proven time and time again.
Actually, it doesn't. The efficient market hypothesis gets us to some price agreement and some notion that said price reflects "available" information. (Insert reference to Paul Newman's phone number problem.)
Absent that, it's still true that company X is worth Y to person Z if Y is willing to buy Z at valuation Y. The fact that someone would do the transaction at a different valuation doesn't change that fact.
"worth" is actually complicated and it's somewhat silly to think that it can be collapsed into a single number.
37signals didn't make fun of Twitter. They made fun of ridiculous, unrealistic valuations.
That Twitter was the subject of a ridiculous, unrealistic valuation is not Twitter's fault, it is the fault of the person doing the ridiculous, unrealistic, valuation claim.
Twitter is a an extreme outlier. Anyone with two synapses to rub together understands this and the implications. It really does give them a lot to blogsterbate about though.
You really think 37signals couldn't decide tomorrow to play the VC valuation game?
They've published enough hints about their customer base to make an order-of-magnitude guess about their topline numbers. They have something like 15 people in the whole company, including support. They are absolute complete geniuses at software marketing --- tens of thousands of people hang on their every word, half of which consist of blog posts that do nothing but talk about moving text boxes around in their existing products.
I don't think they're jealous.
I do think they're arrogant. I think they believe zealously that many of the barriers to getting a software business off the ground are artificial. I get the impression --- colored by my own biases, of course --- that they see VCs and analysts and the trade press and the convention wisdom as gatekeepers that add no value, distort the market, and restrain entrepreneurship.
I have never, ever gotten the sense from anything they've written that they'd look down on me from launching a product --- any kind of product. I've never gotten the sense that I'd have to "qualify" in their eyes to break into the business. Despite extraordinary success and "mindshare", everything they write seems welcoming and encouraging to me, and that's not something I think is easy to pull off.
I'm always a bit confused by why people here are so put off by them. It's always looked to me like these guys are in our corner. The VC startup culture, not so much.
(ps: I can also imagine some straightforward business plans that would justify the insane valuations that Twitter is getting. I can hold these thoughts in my head at the same time.)
I think they absolutely could play the VC valuation game and would be spectacularly successful at it. I'm not trying to take away anything from their success. I greatly respect them and have read and agreed with a lot of what they write. Most of what they write and that I've read so far has been welcoming and encouraging like you say, and has encouraged me even.
All that being said, these last few posts about Mint and people who cash out and now this about Twitter have had quite a different tone.
I remember the first time I read a 37signals post, they wrote something along the lines of, the 37signals way of doing things is not for everyone.
These last few posts make them sound bitter that people are succeeding at doing things a different way.
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[ 76.3 ms ] story [ 885 ms ] threadThat said, a company is worth whatever someone is willing to pay for it. If Twitter (or anyone) can create the perception that their company is worth x, and then sell it for x, then it really was worth x.
This implies transaction takes place in an efficient market - i.e. bidders have full information about the thing they're buying. Tech start-ups market is quite far from being an efficient market, as we see proven time and time again.
Absent that, it's still true that company X is worth Y to person Z if Y is willing to buy Z at valuation Y. The fact that someone would do the transaction at a different valuation doesn't change that fact.
"worth" is actually complicated and it's somewhat silly to think that it can be collapsed into a single number.
That Twitter was the subject of a ridiculous, unrealistic valuation is not Twitter's fault, it is the fault of the person doing the ridiculous, unrealistic, valuation claim.
http://dictionary.reference.com/browse/disingenuous
http://dictionary.reference.com/browse/ingenious
Twitter is a an extreme outlier. Anyone with two synapses to rub together understands this and the implications. It really does give them a lot to blogsterbate about though.
They've published enough hints about their customer base to make an order-of-magnitude guess about their topline numbers. They have something like 15 people in the whole company, including support. They are absolute complete geniuses at software marketing --- tens of thousands of people hang on their every word, half of which consist of blog posts that do nothing but talk about moving text boxes around in their existing products.
I don't think they're jealous.
I do think they're arrogant. I think they believe zealously that many of the barriers to getting a software business off the ground are artificial. I get the impression --- colored by my own biases, of course --- that they see VCs and analysts and the trade press and the convention wisdom as gatekeepers that add no value, distort the market, and restrain entrepreneurship.
I have never, ever gotten the sense from anything they've written that they'd look down on me from launching a product --- any kind of product. I've never gotten the sense that I'd have to "qualify" in their eyes to break into the business. Despite extraordinary success and "mindshare", everything they write seems welcoming and encouraging to me, and that's not something I think is easy to pull off.
I'm always a bit confused by why people here are so put off by them. It's always looked to me like these guys are in our corner. The VC startup culture, not so much.
(ps: I can also imagine some straightforward business plans that would justify the insane valuations that Twitter is getting. I can hold these thoughts in my head at the same time.)
All that being said, these last few posts about Mint and people who cash out and now this about Twitter have had quite a different tone.
I remember the first time I read a 37signals post, they wrote something along the lines of, the 37signals way of doing things is not for everyone.
These last few posts make them sound bitter that people are succeeding at doing things a different way.