Angel Wheel: The company was founded by serial entrepreneurs and received angel investment in the initial stage.

Round A: After 1 year, the company won round A, and at this time, the company's MAU (monthly work) reached 500,000.

A+ round: After A round, the number of company users developed rapidly. After half a year, the company won the A+ round, at which time the company's MAU reached 5 million. Because the company began to realize a small amount of traffic through advertising, it began to have a certain income.

Round B: After 1 year, the company won round B again, and at this time, the company's MAU has reached150,000 people. The reason why ARPU keeps improving is that the company has found effective ways to realize cash in advertising and games.

Round C: After 1 year, the company obtained round C financing. At this time, the company's MAU was 30 million people, and the company blossomed through advertisements, games, e-commerce and membership. In addition, the company has begun to make profits, assuming a net interest rate of 20%.

IPO: In the future, the company will maintain a steady growth of 30-50% revenue and profits every year, and will go public after the C round 1 year.

Let's make some assumptions in reverse chronological order:

After the IPO went public, the open capital market gave the company a price-earnings ratio of 50 times. Careful and professional readers will immediately respond that the stock investment value of this company is not great, PEG > 1 (P/E ratio/growth). Now it seems that the best investment opportunity is still in the private placement stage, and the money has been earned by VC and PE.

In the C round, different investment institutions gave the company different valuations, some were 50 times P/E ratio, some were 10 times P/E ratio, and each valuation method was very logical.

In the B round, different investment institutions gave different valuation methods, and differences began to appear: one institution only valued the price-earnings ratio, and he gave the company a price-earnings ratio of 50 times, but the company was not profitable, so the company was valued at 0; When an institution values P/S, its sales ratio to the company is 10 times.

Different valuation methods, the difference is so big! At this time, it seems that the price-earnings ratio valuation method has failed, but P/S and P/MAU continue to apply, but the estimated price is twice as bad!

To sum up, the valuation method of angel wheel of this internet company is to pat the head; The valuation method of round a is p/mau; The valuation methods of round b are P/MAU and p/s; The valuation methods of round c include P/MAU, P/S and p/e; Maybe a few years after listing, Internet companies will become traditional companies, and everyone will be valued at the price-to-book ratio!

For Internet companies, P/MAU valuation system has the widest coverage and P/E valuation system has the narrowest coverage. Here, I will call this coverage system a sequential evaluation system. P/MAU is a low-order valuation system with the highest tolerance; P/E ratio is a high-level valuation system, which has the highest requirements for companies.

Different valuation methods lead to the same goal. Let's look at a formula: net profit = revenue-cost = number of users × contribution-cost of a single user. Net profit (e, revenue), revenue (s, sales), number of users (MAU), and contribution of individual users (ARPU).

Generally speaking, if the enterprise does not have E, it can also vote for S; If there is no S, you can still vote for MAU, but in the end you still expect that traffic can be converted into income and income can be converted into profit. Different startups are in different stages, some are in the stage of desperately expanding the number of users, some are in the stage of racking their brains to achieve traffic, and some are in the stage of thinking about how to achieve profitability every day.

However, in the end, everyone will look at a company according to its profit. At that time, the valuation methods of different orders were the same.

Why do well-developed companies "die in round B" and "die in round C"?

Some companies have a large user base, but it doesn't always translate into revenue. If investors insist on valuing according to the high valuation system P/S in the next round of financing (assuming that it is the B round), then the company's valuation will be 0, and if it is not funded, then the B round will die.

Some companies have a good income scale, but they always can't see the hope of profit. If they are faced with PE institutions that are only valued by net profit in the next round of financing (assuming that it is the C round), they think that if the company's P/E ratio is 0, the company will not be able to raise funds, and the C round will die.

In different economic cycles, the scope of application of the valuation system will shift: in a bull market, the valuation system will move backward, which can explain why many companies that have no net profit in the past two years have won in the C, D and even E rounds, and they were invested by traditional pe institutions, because they were downgraded and began to use the bottom tool P/S.

In a bear market, the valuation system will move forward, which can explain why since the second half of this year, some companies with good income and users have not been able to get financing, and even can only merge for heating, because even many VCS require profit, and everyone hides a low-level valuation system.