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Seed Valuations Aren’t Valuations - by Nnamdi Iregbulem

whoisnnamdi.substack.com · 1,588 words · saved by 1 readers

In short, seed valuations are a bit of an enigma — it’s not at all obvious what drives them. However investors arrive at these numbers, they aren’t doing so based on typical Finance 101 factors like discount rates or comparable company analysis. Seed companies don’t seem to be priced as businesses with intrinsic value derived from future cash flows. Rather than venture capital, they seem to be a proxy for the human capital of the founders and early team. Seed valuations aren’t valuations. Receive my new long-form essays First: seed valuations aren’t volatile enough. This really stood out when constructing my Venture Activity Index – the volatility of the late stage is much higher than the early stage, which is true even if you exclude the pandemic era: This is strange. If seed stage investments are as speculative as they’re purported to be, we'd expect wild valuation fluctuations over time. Late-stage valuations should be more stable, since they have an existing business model, revenue

Seed Valuations Aren’t Valuations It’s not obvious what drives them Nnamdi Iregbulem Oct 02, 2024 84 10 11 Share Seed valuations don't behave like valuations: They are too stable over time for such a speculative asset They are impervious to shifting interest rates They don’t follow public tech valuations In short, seed valuations are a bit of an enigma — it’s not at all obvious what drives them. However investors arrive at these numbers, they aren’t doing so based on typical Finance 101 factors like discount rates or comparable company analysis. Seed companies don’t seem to be priced as busine

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