I appreciate the follow up. I think where we disagree is that a priced round is a disincentive to the founder. Instead of a disincentive, I think a priced round is "fair." A few quick comments:
- are there any other areas where, as a buyer/investor, you buy at a discount to a future price instead of an estimated current price? For example in places where houses appreciate quickly, people still buy houses at a fixed price. No seller ever says "this house might be worth $2m-5m in 10 years, so instead of buying it for $1m today, which don't you buy it for a 20% discount to when you sell it 10 years from now?" Same thing with paintings, stocks, etc.
- the $5m -> $30m mark-up is not a mispricing. For public stocks, pricing is based is based on expected cash flows. For example, if a company is expected to make $10m/year for 30 years, it might be worth $300m today, minus an adjustment for inflation (so maybe it's only worth $200m today). For startups, the valuation is based on "% chance of a huge outcome." So when a company goes from $5m to $30m in valuation, that doesn't mean its revenues jumped 6x. What it really means is investors think the company made enough progress so that instead of a 1% chance at a $1b exit, there's now a 6% chance at a $1b exit. In that regard, the company is worth $30m today, but it was also not worth that at the seed round.
- are there any other areas where, as a buyer/investor, you buy at a discount to a future price instead of an estimated current price? For example in places where houses appreciate quickly, people still buy houses at a fixed price. No seller ever says "this house might be worth $2m-5m in 10 years, so instead of buying it for $1m today, which don't you buy it for a 20% discount to when you sell it 10 years from now?" Same thing with paintings, stocks, etc.
- the $5m -> $30m mark-up is not a mispricing. For public stocks, pricing is based is based on expected cash flows. For example, if a company is expected to make $10m/year for 30 years, it might be worth $300m today, minus an adjustment for inflation (so maybe it's only worth $200m today). For startups, the valuation is based on "% chance of a huge outcome." So when a company goes from $5m to $30m in valuation, that doesn't mean its revenues jumped 6x. What it really means is investors think the company made enough progress so that instead of a 1% chance at a $1b exit, there's now a 6% chance at a $1b exit. In that regard, the company is worth $30m today, but it was also not worth that at the seed round.