Valuation of Tech Start-ups

When it comes to the accepted valuation of certain privately held companies, namely tech start-ups, one cannot help but wonder how they achieve such tremendous numbers on paper, even when they exhibit no such profit (some haven’t even broken even) or even made any substantial revenue (not to mention a lack of solid assets). All of this is built on a simple concept known as speculation.


Speculation can be defined as the forming of a theory or conjecture without any firm evidence. In the above-mentioned case, a tech start-up might utilize the self-bestowed worth of their proprietary product/service and associated technology to come up with their lofty valuation with considerable weight being put on potential projected future revenue. It should be noted that many such companies often have the habit of comparing themselves to the early stages of successful tech giants such as Google or Facebook, and in most cases, investors totally buy into it.


Although there are several notable success stories in the field of tech start-ups, there are a considerably larger number of failures. It is no wonder why many individuals might consider speculation to be the mother of all evils. Additionally, the past mistakes that led to the infamous Dot Com Bubble of the early 2000s could be a possible indication of what could happen if speculation of tech start-up investments go overboard (as they reportedly are).


In conclusion, the results of this ongoing phenomenon could be summed up by the quote, “those who do not remember the past are condemned to repeat it”.