The Valuation Obsession

Fred Wilson:

CEOs and their talent organizations frequently tell me that it is easier to recruit people to companies that have raised at eye popping values. This is particularly peverse because the higher the valuation, the less money the employee will make on their equity. But, it seems, the talent market is looking to the investment community to signal to them what companies are worth working for.
It should work the other way around. I like to invest in companies that smart people are joining. Capital should follow talent, not talent following capital.

This is unfortunately very true. And it’s fueling a pretty substantial part of our current boom. Many companies — very good companies — are raising funds simply because they need to signal to the market that their value is constantly going up in an age where everyone else's value is going up. Valuation stagnation -- er, stability? -- may as well be death. Which is nuts. But it is what it is. 


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