One thing I read that isn't often mentioned is how liquidation preference for late rounds can drive a lot of these insane valuations.
For example, let's say you raise $250MM in a series E at a 10B post money. As a company/founder, this makes you look awesome on paper and super valuable as a company. Meanwhile, the series E investors usually have the top priority for liquidation, meaning the risk is actually pretty small, since the sale/IPO value would have to go below 250MM before you lose money.
The real people getting screwed by these paper unicorns though are the late stage employees being sold options as compensation.
For example, let's say you raise $250MM in a series E at a 10B post money. As a company/founder, this makes you look awesome on paper and super valuable as a company. Meanwhile, the series E investors usually have the top priority for liquidation, meaning the risk is actually pretty small, since the sale/IPO value would have to go below 250MM before you lose money.
The real people getting screwed by these paper unicorns though are the late stage employees being sold options as compensation.