The joke is an homage to the oft-mocked truth that in the world of high-valuation startups, investors have historically favored growth above profits.
Public investors, it turns out, are not always willing to pay astronomical multiples for money-losing companies just because founders, VCs and investment bankers spin a great narrative about their world-changing potential.
That is: What level and type of losses are acceptable to public market investors these days?
We Make The Valuations, Not You: At some points in the business cycle, startup IPOs are essentially a seller’s market.
Public investors are eager for new offerings, and it’s relatively easy for IPO underwriters to sell shares their at desired price.
In a hot seller’s market, one can list a home with ugly pink bathroom tiles and still get multiple good offers in a few days.
In recent months, public market investors have seen a lot of IPO filings with the financial equivalents of ugly pink bathroom tile.
U.S. indexes are still trading near multi-year highs, the IPO window is open, and public investors are looking for new growth stories.
But while some balance sheet ugliness remains tolerable, do expect public investors to demand a discount.
Looking at the emerging standards of public market investors, a casual observer might say they seem pretty sensible.
For now, expect the startup crowd to talk about how a successful bar investment now includes selling some drinks, preferably at more than it costs to pour them.