How companies get valuated reminds me of when they taught me several pre-Charles Darwin theories of evolution at high school. They were all over the place. They all lacked the basic beauty of Darwin's theory of evolution.
Pre-Darwinian Theories of Evolution: the idea of spontaneous generation, which stated that living things can appear fully formed from inorganic matter.. maggots came from rotting meat, frogs came from slime, etc. ...... idea of the inheritance of acquired characteristics.. an organism could pass on to its offspring any characteristics it had acquired in its lifetime...if a man exercised and thus developed strong muscles, his offspring would then have strong muscles at birth
There are some parameters that are in play. But how they get measured is all over the place. You assign value to an idea, a team, a basic product. You, hopefully, add to that value over time. Early team members get more than later ones. Early investors get more. But then sometimes big bulleys come into the picture and dilute away the early investors and the founders. They kill the hen that lays the golden egg through their behavior sometimes.
Post IPO people who show up - either investors or team members - are basically screwed. They don't see the huge gains that early team members see, even though some of them might make major contributions.
Sometimes the founders keep some ownership, but even the early team members are basically hired guns with no equity. They are reduced to being salaried people.
But then even the startups that gain in value over time and see some sort of an exit live in a sea of mostly startups that go down under: ideas that never materialized, teams that splintered and gave up, companies that actually lost value over time. A lot of tech startups go belly up. Investors lose money. Founders have nothing to show for. They descend into the job market.
New Yorker Mark Peter Davis has done a good job at his blog of explaining how his venture capital business works. I hope to learn. But primarily I hope to challenge. I am on the side of the entrepreneurs and full time team members.
Entrepreneur's Guide To Raising Venture Capital