Big Numbers

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The press loves big numbers.  Why? Because, the readers love big numbers.  Look at the headline below:

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There are two very large numbers, $5.5 billion and $62.5 billion, referring to two highly ambitious and rapidly growing companies, Lyft and Uber.  I am a fan of both startups.  However, they are both quite tiny in the global enterprise scale.

When you say an $X billion company, one understands that it’s a top-line revenue number.  Apple is a $230 billion company and Walmart is a $480 billion company, in general business speak.

I would also understand referring to these businesses by market cap.  It’s the company value of these businesses based on very liquid market information.  By this measure, Apple is a $450 billion company and Walmart is a $220 billion company.

You’ll notice that these two sets of numbers are almost exactly asymmetrical, so it’s always critical to clarify what one means when the phrase “$X billion company” is brought up.  But I find both to be acceptable and practical.

Then, there is the startup version, with which I have a problem.  I mentioned that both Lyft and Uber are quite tiny.  To be specific, lats year Lyft had a rumored ~$100 million in revenues.  Uber, which is larger, had its revenues estimated at $1.5b billion.  Both numbers are very small compared to those of Apple and Walmart.  Bu this is not stopping the press to refer to them as $5.5 billion and $62.5 billion companies.

Why? VC round valuations.  These two companies, have been valued, in private rounds, details of which are not announced, at the larger numbers mentioned above.  So, all of a sudden, you find that you can get away with calling Uber a $62.5 billion company. And, jaws drop.  Your readers are awed. Links get clicked on.  Young entrepreneurs pull out their calculators and start multiplying their own metrics with the multiples they can extrapolate from Lyft and Uber numbers.  And, expectations rise, appetites get whetted…  And, bubbles form.

Because, the press loves big numbers.

 

 

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