Lol nothing matters

Or: the formative lesson I learned early on about valuations unfortunately has new resonance

Something important to know about journalism is that you don’t have to be particularly knowledgeable to start covering a beat. I was a 21-year-old idiot in 2014 when I was hired to cover tech. I didn’t know anything about tech. In college I was the editor-in-chief of Syracuse’s music magazine. I wrote a feature about Tumblr’s pro-anorexia community for my magazine reporting class that never got published because I felt too self-conscious to show it to anyone. Later I used that as one of my clips I sent out to recruiters. I assume the hiring managers at my first job looked at my thin resume and that story and shrugged their shoulders and said “she’s literate! good enough,” and then I was writing about tech. 

This was, incidentally, an interesting time to learn how to report on tech. I wrote about private companies — my beat included Uber, the gig economy, New York startups, and venture capital. If you were a founder, it was a good time to raise. The venture-capital market was very “frothy.” The tech press was (slightly) more credulous. So were VCs. They used a figurative firehose to spray money everywhere because they didn’t want to miss out on the next big thing. If you were a 20-something white guy in the mid-2010s and projected enough confidence and had an idea that sounded halfway compelling it seemed like you could get your startup funded, and then get a few outlets to write about it, and then use your funding for growth, and then hit an impressive-sounding but decontextualized and meaningless milestone and get more coverage, and then raise more money. As far as I could tell, this was how it worked, except for when it didn’t

It was intimidating to be the youngest, dumbest person in the room at any tech event I went to in 2014. I am loath to ask for help. It’s one of my worse qualities. I was afraid to ask questions because I thought it would reveal how little I knew. One question I had while watching Uber gobble up more and more funding was: who decides how much something is worth? It seemed arbitrary that a private company was worth $2 billion one day and $10 billion the next. I assumed there were adults in the room with calculators doing some complicated but real math that could justify a lofty valuation. And while I’m sure that, yes, a value gets decided in part by using comparative company analysis and calculating industry averages for public companies similar to the target firm using operating margins or free-cash-flow or the EBITDA multiple or whatever, the reality of being a private company is that you get to make up your own value. 

In other words: lol nothing matters. I felt less dumb when I internalized this, that these founders and their boards and the people funding them were “yes, and”-ing their way through this whole thing.

The lesson I learned a while ago about the meaninglessness of capital value seems to be everywhere now. Uber was privately valued at $72 billion pre-IPO, and hoped to be valued by the public markets at $84 billion. Today its market cap is about $50 billion—close to its value in July 2015, when it raised $1 billion at a $51 billion valuation.

Over the past two weeks we watched as digital media cuffing season continued apace. I thought again about valuations, and how devoid of meaning they are, and how inevitable all of this consolidation felt. Vox buying New York Media in an all-stock deal. Vice buying Refinery29 in an all-stock deal. Group Nine buying PopSugar in an all-stock deal. PopSugar is valued at $300 million. New York Media is valued at $105 million. Refinery29 is valued at $400 million.

The values of these media acquisitions reminded me of the tech startups I used to cover, reassigning themselves higher valuations after raising a fresh round of funding. PopSugar is worth 50% of Group Nine's $600 million valuation? How does that make sense? It doesn’t, actually, and it doesn’t have to. As digital media companies have laid off employees, burned through their funding, pivoted to and away from video, failed to find an actual profitable and sustainable business model, and been forced to reconcile with the fact that they probably can’t raise much more cash from investors who want media entities to scale like the tech companies they’re used to investing in, these high-valuation all-stock deals seem like the only bloodless means of survival for all parties involved.

Ultimately, these stock deals and their corresponding valuations, they’re just numbers agreed upon by buyer and seller. There’s no public exchange to list the value on. Until some exit event happens, either selling the company to someone else or going public and letting the market assign worth to a company, the valuations mean nothing. What we should be asking ourselves is what these assets would sell for if someone were buying them with cash instead of Monopoly money, but that would require contending with the grim reality of the state of our industry.