UKNM: Re: UKNM :Internet Startup Values

[Michael Waller-Bridge]

valuations based on DCF don't take into account marketplace sentiment, and

are in any case best applicable to calculating, as the term implies,

present value from a rationally expected future cash stream eg in a

'mature' business or a financial instrument. A company is worth what

someone will pay for it, as they say, and in the case of recent startups,

prerevenue companies, also depends of course as much on the extent/future

timing (calculated from burnrate) of distress the company may be in

cashwise, balanced with the brilliant positioning, early adopter customers,

brand building /recognition it will have already achieved. Quoted versions

find expectations hugely built in into the share price, which  can seesaw

accordingly. A west coast vc recently remarked to me  that, among 

technology-led startups, say pre-revenue or "shipping" but not yet cash

positive, "P/E" stands for "price per engineer", and that the rate applied

by the corporate buyer in one transaction (3yr old company) two months ago

was $3m per qualified professional engineer, in the absence of other

meaningful financial metrics (ie throw away the yards of spreadsheets with

questionable underlying assumptions), simple as that ! In bull markets

cynics maintain it's best to sell such newcos before going operational !