Basecamp's Fictional One-Dollar Funding Round: Satirizing the Valuation Game

Basecamp's two founders certainly have minds of their own. During a funding winter, the practice of raising money, burning it to grab territory, buying time, and inflating valuations to “rapidly develop” into unicorns without business results is coming under scrutiny. Jason Fried plays with dark humor in a fictional announcement of a $1 funding round. Before starting a business, everyone should understand that valuation is paper wealth; revenue is real money. In the fictional news report, Basecamp decides to stop generating revenue to increase the company's value. “Making money is a real obstacle to valuation. Our profitability has dragged down our valuation,” Fried says. “Once you have profits, you cannot just make things up. That is why we are switching to the ‘free economy’ model. We will make everything free and leave the market to guess how much money we could make if we wanted to. Then the sky is the limit!” A $100 billion valuation for Basecamp is “not surprising,” says Aanandamayee Bhatnagar, finance professor and valuation guru at the Schnook Business School in Grenada (Schnook means a fool). Bhatnagar cites a leaked confidential corporate strategy predicting that Basecamp will attract 12 billion users by the end of 2016. But the world's population is currently only 7.3 billion. How will the company overcome that? “Why do users have to be human?” Bhatnagar replies. (Ha—satirizing fabricated users and traffic.) To value the company, Bhatnagar uses this formula: [(Twitter followers x Facebook followers) + (employees x 1000)] x (total likes + daily page views) + (monthly burn rate x Google's share price) – Square's share price. Double the result if the company is mobile-first or its CEO has messed up before. Bhatnagar admits the algorithm is basically a guess but notes that “the media buy it all.” https://www.36kr.com/p/1720983961601