1/ Buffett& #39;s mentor, Benjamin Graham said:

"In the short-run, the stock market is a voting machine. But, in the long-run, it is a weighing machine."

Short term: Hype. Narrative. https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚀" title="Rocket" aria-label="Emoji: Rocket">
Long term: Revenue. Earnings. Margins. https://abs.twimg.com/emoji/v2/... draggable="false" alt="⚖️" title="Scales" aria-label="Emoji: Scales">

The same is true in the venture market....

2/ Over the last few years, we& #39;ve seen eye-popping valuations from startups where the results don& #39;t add up.

Startups that had raised tens of millions of dollars, had huge teams...

But behind the curtain, their P&L was fucked. YEARS in to operations: tiny revenue, huge expenses.

3/ But that& #39;s all changing...

"X competitor raised at Y" is no longer enough to cement your valuation.

Startups need serious traction, revenue, and profitable unit economics, to raise.

4/ And if they can& #39;t raise, they are going to need to liquidate or sell, which is where the dreaded weighing machine comes in...

5/ We often see founders get attached to venture valuations, forgetting that ultimately, when they sell the whole business, the weighing machine is ALL that matters.

Your buyer has to have a way to pay themselves back, either via strategic synergy, earnings, or future sale.

6/ In this new world, your venture valuation is irrelevant.

VC valuations are basically made up. They have all sorts of complex financial instruments to protect themselves, and they are indexing.

Today:

Results matter.
Traction matters.
Revenue matters.
Margins matter.

7/ At the end of the day, the numbers have to work.

The weighing machine has arrived https://abs.twimg.com/emoji/v2/... draggable="false" alt="🔥" title="Fire" aria-label="Emoji: Fire">https://abs.twimg.com/emoji/v2/... draggable="false" alt="⚖️" title="Scales" aria-label="Emoji: Scales">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🔥" title="Fire" aria-label="Emoji: Fire">