A Fasted State

Setting the stage for real long-term compounding

It’s quite common to hear about companies raising large funding rounds at mouth-watering valuations. The question is how companies with a lack of proven product-market-fit can still command such valuations. When I talk to some investors, they tend to focus on multiples paid on historical performance, without placing enough emphasis on future outcomes.

A company raising $1M vs. a company raising $50M, assuming they are both in similar businesses, will have very different future outcomes, and valuation is dependent on that future outcome and how fast it is achieved.

Peter Thiel said it nicely:

“I think the way one should always try to pitch the value of a company is by explaining why it will be worth a lot more in the future and why investors are getting to invest at a point where it’s a lot cheaper”