[projectramo]

I think part of the problem is in how you value companies. Basically, you can only "value" a company when someone makes an investment. So if a (sophisticated?) person or VC invests in it, or if it goes public, we would consider that an estimate of value.

If no one invests in it, and you are clipping coupons, how would you know you have a billion dollar company? You could have $100 million a year in earnings and some growth, and have a pretty good idea, but you don't know. Conceivably, whatsapp could have bootstrapped their way to $1 Billion before they accepted VC money, but even they may not know.

[daiidgo]

Actually, if you have multiple owners you really want to have your company appraised on a regular basis (every 6 months if you're beyond a little startup). Reason being, if you should happen to encounter an event that triggers a buyout right of one of your members/shareholders/partners, you want a contractually accepted valuation to control the cost of the buyout. Well planned valuation procedures can really help avoid costly litigation over the value of an ownership interest.

Appraisers can value your company above a billion dollars without you ever taking on an outside investor. If someone does go to invest, they're going to hire their own appraiser (or entire firm of economists) to determine how much your company is worth prior to investing.

Appraisals aren't free, but they have significant long term benefits. Their estimate of your company value tends to be as accurate as any potential investor's estimate (competing biases on other sides of the ideal valuation).

[projectramo]

That makes sense, and I agree with you. I will point out that those appraisals are usually kept private so we still have to base our valuations on announced deals. (In the original context of trying to value a bootstrapped company).