The Single Biggest Determinant of Startup Valuations at IPO

This post is by Tomasz Tunguz from Tomasz Tunguz

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In 2013, growth trumps all other considerations. For the average 2013 venture backed tech IPO, half of the startup’s enterprise value is explained by its growth rate, while none of it is explained by profitability. The market has spoken and startups have responded. Of the 25 IPOs I surveyed, both pending and completed, only 20% are profitable. On average, these startups operate at about -20% net income margins but are growing at 162% annually.

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