Gurley notes Lemonade, Unity, and Palantir are still trading at 20 times sales despite falling 60%.
“And yesterday in preparing for this, I was looking at some of the stocks that are outliers on price to sales and lemonade, unity and Palantir, which have come in 60% are still at 20 times over sales.”
Gurley criticizes Silicon Valley's crude valuation approach, where entrepreneurs expect 10x revenue regardless of business model quality.
“I've always felt Silicon Valley has a very crude understanding of valuation. Most entrepreneurs think they all deserve 10 times revenue and also with zero regard for what the revenue is.”
Gurley observes IPO market valuations currently exceed M&A market valuations.
“I think another interesting characteristic of that, in my mind, the IPO market's paying much higher valuations in the m and a market right now.”