The verbal gymnastics required to differentiate between what VC's seem to mean by valuation and the common-sense use of the term is one of the key things that makes this a bubble.
VC's are okay buying a share of a company as-if the company were worth a billion+ because they (rightly) believe that they can (frequently) turn around and exit in an IPO and get a significant return by convincing others that the company is worth a lot of money – never mind that the long-term financials and competitive advantages aren't there to back that valuation up.
As a (relatively) short-run money making scheme, many of the VC's have it spot-on, but at some point, if the markets can't sustain the aggregate valuations of all of these multi-billion dollar valuations, the IPO values will dry-up and someone's going to be left holding the bag. That is to say, the bubble will burst at some point if it's not carefully deflated.
VC's are okay buying a share of a company as-if the company were worth a billion+ because they (rightly) believe that they can (frequently) turn around and exit in an IPO and get a significant return by convincing others that the company is worth a lot of money – never mind that the long-term financials and competitive advantages aren't there to back that valuation up.
As a (relatively) short-run money making scheme, many of the VC's have it spot-on, but at some point, if the markets can't sustain the aggregate valuations of all of these multi-billion dollar valuations, the IPO values will dry-up and someone's going to be left holding the bag. That is to say, the bubble will burst at some point if it's not carefully deflated.