Comments on: Before turning on the water http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/ By Ryan Graves Wed, 08 Sep 2010 18:40:52 +0000 hourly 1 http://wordpress.org/?v=3.1.4 By: Ryan Graves http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1271 Ryan Graves Tue, 22 Dec 2009 00:39:19 +0000 http://thedreaminaction.com/?p=3457#comment-1271 Thus my comment, "I respect your skepticism."<br><br>:) Thus my comment, “I respect your skepticism.”

:)

]]> By: allenburt http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1270 allenburt Tue, 22 Dec 2009 00:03:03 +0000 http://thedreaminaction.com/?p=3457#comment-1270 Startup valuations are by their very nature skeptical. <br><br>Most web technology startups are extremely difficult to value because nothing like them has ever been done before. These valuations are based on nothing more than what a few seed investors believe them to be worth. There is no such things as market comparables or cash flow to base value.<br><br>Sure, you can estimate market value based on what others have invested for pieces of the business (ex seed funding). But these investments are extremely high risk, well above normal failure rates. Therefore, not very good indicators of long term expected value.<br><br>You better be skeptical of startup valuations. Startup valuations are by their very nature skeptical.

Most web technology startups are extremely difficult to value because nothing like them has ever been done before. These valuations are based on nothing more than what a few seed investors believe them to be worth. There is no such things as market comparables or cash flow to base value.

Sure, you can estimate market value based on what others have invested for pieces of the business (ex seed funding). But these investments are extremely high risk, well above normal failure rates. Therefore, not very good indicators of long term expected value.

You better be skeptical of startup valuations.

]]> By: Ryan Graves http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1269 Ryan Graves Mon, 21 Dec 2009 23:35:18 +0000 http://thedreaminaction.com/?p=3457#comment-1269 Trust me, these startups are contemplating revenue model opportunities from<br>day 1. It's rarely public however, and this privacy of plan strategy<br>significantly benefits them from a competition perspective.<br><br>Publicizing their rev plan may benefit some startups in this way: As an<br>example, if twitter plans to charge for use of it's API (which I doubt they<br>do) then they should be clear with that up front so that they don't piss off<br>thousands of developers down the road. Don't lock people in then turn on the<br>"you have to pay us now" switch, that could be dangerous. Trust me, these startups are contemplating revenue model opportunities from
day 1. It's rarely public however, and this privacy of plan strategy
significantly benefits them from a competition perspective.

Publicizing their rev plan may benefit some startups in this way: As an
example, if twitter plans to charge for use of it's API (which I doubt they
do) then they should be clear with that up front so that they don't piss off
thousands of developers down the road. Don't lock people in then turn on the
“you have to pay us now” switch, that could be dangerous.

]]> By: allenburt http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1268 allenburt Mon, 21 Dec 2009 21:57:52 +0000 http://thedreaminaction.com/?p=3457#comment-1268 I'm personally skeptical only when the revenue model has not been defined. I agree, the connections must be joined together tightly before turning on the water. But, many of these high valuation startups have not (at least publicly) defined what type of hose (rev model) they are going to use.<br><br>Users x Great Revenue Model = High Valuation. I have a hard time swallowing a high valuation without a clear understanding of HOW they will make money. I'm personally skeptical only when the revenue model has not been defined. I agree, the connections must be joined together tightly before turning on the water. But, many of these high valuation startups have not (at least publicly) defined what type of hose (rev model) they are going to use.

Users x Great Revenue Model = High Valuation. I have a hard time swallowing a high valuation without a clear understanding of HOW they will make money.

]]> By: Ryan Graves http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1267 Ryan Graves Mon, 21 Dec 2009 19:35:59 +0000 http://thedreaminaction.com/?p=3457#comment-1267 Thanks boss. Thanks boss.

]]> By: reecepacheco http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1266 reecepacheco Mon, 21 Dec 2009 19:02:46 +0000 http://thedreaminaction.com/?p=3457#comment-1266 Great analogy. <br><br>I was a volunteer firefighter for a bit. You always lay your hose, check your connections AND be sure you're holding on tight, before letting the water go. <br><br>When you don't, it's a disaster. Great analogy.

I was a volunteer firefighter for a bit. You always lay your hose, check your connections AND be sure you're holding on tight, before letting the water go.

When you don't, it's a disaster.

]]> By: Ryan Graves http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1252 Ryan Graves Mon, 21 Dec 2009 17:39:19 +0000 http://thedreaminaction.com/?p=3457#comment-1252 Thus my comment, "I respect your skepticism."<br><br>:) Thus my comment, “I respect your skepticism.”

:)

]]> By: allenburt http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1251 allenburt Mon, 21 Dec 2009 17:03:03 +0000 http://thedreaminaction.com/?p=3457#comment-1251 Startup valuations are by their very nature skeptical. <br><br>Most web technology startups are extremely difficult to value because nothing like them has ever been done before. These valuations are based on nothing more than what a few seed investors believe them to be worth. There is no such things as market comparables or cash flow to base value.<br><br>Sure, you can estimate market value based on what others have invested for pieces of the business (ex seed funding). But these investments are extremely high risk, well above normal failure rates. Therefore, not very good indicators of long term expected value.<br><br>You better be skeptical of startup valuations. Startup valuations are by their very nature skeptical.

Most web technology startups are extremely difficult to value because nothing like them has ever been done before. These valuations are based on nothing more than what a few seed investors believe them to be worth. There is no such things as market comparables or cash flow to base value.

Sure, you can estimate market value based on what others have invested for pieces of the business (ex seed funding). But these investments are extremely high risk, well above normal failure rates. Therefore, not very good indicators of long term expected value.

You better be skeptical of startup valuations.

]]> By: Ryan Graves http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1250 Ryan Graves Mon, 21 Dec 2009 16:35:18 +0000 http://thedreaminaction.com/?p=3457#comment-1250 Trust me, these startups are contemplating revenue model opportunities from<br>day 1. It's rarely public however, and this privacy of plan strategy<br>significantly benefits them from a competition perspective.<br><br>Publicizing their rev plan may benefit some startups in this way: As an<br>example, if twitter plans to charge for use of it's API (which I doubt they<br>do) then they should be clear with that up front so that they don't piss off<br>thousands of developers down the road. Don't lock people in then turn on the<br>"you have to pay us now" switch, that could be dangerous. Trust me, these startups are contemplating revenue model opportunities from
day 1. It's rarely public however, and this privacy of plan strategy
significantly benefits them from a competition perspective.

Publicizing their rev plan may benefit some startups in this way: As an
example, if twitter plans to charge for use of it's API (which I doubt they
do) then they should be clear with that up front so that they don't piss off
thousands of developers down the road. Don't lock people in then turn on the
“you have to pay us now” switch, that could be dangerous.

]]> By: allenburt http://thedreaminaction.com/2009/12/21/before-turning-on-the-water/comment-page-1/#comment-1249 allenburt Mon, 21 Dec 2009 14:57:52 +0000 http://thedreaminaction.com/?p=3457#comment-1249 I'm personally skeptical only when the revenue model has not been defined. I agree, the connections must be joined together tightly before turning on the water. But, many of these high valuation startups have not (at least publicly) defined what type of hose (rev model) they are going to use.<br><br>Users x Great Revenue Model = High Valuation. I have a hard time swallowing a high valuation without a clear understanding of HOW they will make money. I'm personally skeptical only when the revenue model has not been defined. I agree, the connections must be joined together tightly before turning on the water. But, many of these high valuation startups have not (at least publicly) defined what type of hose (rev model) they are going to use.

Users x Great Revenue Model = High Valuation. I have a hard time swallowing a high valuation without a clear understanding of HOW they will make money.

]]>