Saturday, May 30, 2015

Technology startups are grossly overvalued

Overvaluations of new economy companies are sky high, beyond any economic justification. Since pre-IPO startup revenues are not disclosed, it makes hard to estimate their real worth. Some example: Uber is valued at $41 Bln with annual revenues approaching $10 Bln (ratio 4:1). For comparison, Caterpillar (old economy company) has market cap (valuation) $51.5 Bln with annual revenues of $55 Bln (ratio 1:1). Hortonworks (after IPO) barely makes pathetic $40 mln in annual revenues (yet its market cap $1.1 Bln) (ratio 25:1).
Chart source: The Age of Unicorns
Pointed out by

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