But see, that's kind of the thing--how a valuation is computed and what that actually means are two different things. For instance, let's say I put $10,000 down on a house in 2007 that's worth $500,000. Is that house really worth $500,000, or is that valuation a side effect of easy lending? I guess it depends on when you calculate that worth.
But take 5 companies that have a combined valuation of $5 billion according to their last round. My point is simply this: those companies together are not actually worth 5 billion dollars, in that you cannot find someone to buy them at that price. You can sell portions, sure. But you end up with less than the 5 billion quoted in NYT.
But as pg points out, in practice, nobody is trying to buy companies that way, and there are many other factors at work. And hey, maybe 4 of those companies go out of business but one of them is the new new thing--then it just doesn't matter and you've been successful as an investor in super risky businesses. But even still, there's a difference between the cost of part of something versus the cost of the whole--same difference between paper wealth and actual wealth.
But take 5 companies that have a combined valuation of $5 billion according to their last round. My point is simply this: those companies together are not actually worth 5 billion dollars, in that you cannot find someone to buy them at that price. You can sell portions, sure. But you end up with less than the 5 billion quoted in NYT.
But as pg points out, in practice, nobody is trying to buy companies that way, and there are many other factors at work. And hey, maybe 4 of those companies go out of business but one of them is the new new thing--then it just doesn't matter and you've been successful as an investor in super risky businesses. But even still, there's a difference between the cost of part of something versus the cost of the whole--same difference between paper wealth and actual wealth.