The 21 largest companies are highly valued because they're generating tons of revenue (or even profits), and nothing short of a collapse in their market could halt that income generation.
I don't think valuation of startups are strongly based on revenue and profit. At least not in a way where their revenue/profits force a certain valuation, rather than simply suggest that the potential and growth is there. (if that makes sense).
Yeah, absolutely makes sense. Here's a proof by cases on my point:
Companies are highly valued b/c they (a) generate income or (b) have the potential to generate income. (a) companies are trivial cases, since they already make money. Let's move on.
Looking at (b) companies: they're highly valued because market conditions + company fundamentals suggest they CAN generate income soon. Let's assume company fundamentals (leadership, labor) are constant and solid (trivial, since they're being advised by PG and other VCs).
Therefore, highly-valued companies that do no yet generate income can only be negatively disrupted by market forces. Based on the initial assumption about (b) companies' potential, I argue that (b) have been selected such that they are not particularly vulnerable to negative shocks.
Therefore, their valuations have a very, very high floor and are sticky in the downward direction.
What about AirBnB? You don't think a $500M valuation would be considered reasonable by many? AirBnB seems like a classic example. $25M in revenue and $1B valuation (40x). The market moving slightly to a more hardcore earnings based valuation could easily see their valuation cut in half (20x).
No less of a company, but a slight change (yet reasonable change) could drastically effect their value (as it would with most startups at a similar phase).
I don't think valuation of startups are strongly based on revenue and profit. At least not in a way where their revenue/profits force a certain valuation, rather than simply suggest that the potential and growth is there. (if that makes sense).