Day: February 26, 2009

YouNoodle: Valuations for dummies

We were talking to a guy about his web site and he claimed it was worth millions of dollars. Since his site has zero profits on very little revenue and low traffic (and is declining in traffic), we thought it was a joke. But he proudly showed us a “YouNoodle”: valuation certificate. They really give a printable certificate complete with a gold seal, suitable for framing, I suppose.

Sure enough, YouNoodle says his site is worth millions. I’d never heard of YouNoodle (for good reason, I guess). It’s a site for early stage startups to get in contact with investors and people who can help the startup. They ask you a few questions about your startup, presumably so that would-be investors can take a look at your startup to see if they’re interested. But they go a step further (too far) and determine your valuation, a real dollar value, in 3 years.

As if the concept for determining future value wasn’t ridiculous enough, the questions they ask are “How do the founders know each other?” and “How much money do you expect to make in the future?”. Those are good questions for potential investors to ask, but you’d have to have absolutely no understanding of business or economics or reality, for that matter, to conclude that those questions actually determine value.

Incidentally, YouNoodle values this blog, which makes no money at all, at $7 million! Is it 1999 all over again?!?

Note the fine print:

bq. YouNoodle’s model is based on rigorous quantitative analysis of historical data and the application of the latest relevant theory.

“Rigorous quantitative analysis” means they asked a few questions and did no analysis at all and “the application of the latest relevant theory” means they used whatever theory they like best at the moment.

And note the even finer print:

bq. You should not rely on Startup Predictor for any financial decision and should always seek
the assistance of a professional for any tax, legal, accounting or investment advice.

In other words, this number is completely fictitious so don’t blame us if you’re stupid enough to believe it and make financial decisions based on it.

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