We need to stop pretending the VC valuations are meaningful.
It's like asking someone playing roulette to value "13 black", after they bet on it.
There valuations are always based on expectations of huge growth, not current value. Growth predictions with an extremely low confidence level. VCs make up for it by making a lot of bets.
The companies NEVER have current profits (The actual measure of value) that would justify their valuation.
So, it's comparing gambling payouts to corporate valuations, aka "apples to oranges", which are not related.
When the predicted growth doesn't occur, the companies valuation becomes based on its actual value (profits).
It's like asking someone playing roulette to value "13 black", after they bet on it.
There valuations are always based on expectations of huge growth, not current value. Growth predictions with an extremely low confidence level. VCs make up for it by making a lot of bets.
The companies NEVER have current profits (The actual measure of value) that would justify their valuation.
So, it's comparing gambling payouts to corporate valuations, aka "apples to oranges", which are not related.
When the predicted growth doesn't occur, the companies valuation becomes based on its actual value (profits).