I think when a model is presented like this, it should also show the examples where it fails. In the article, they show Square (Series E valuation at 6 B, pre-IPO 2.66 B) where the "fair valuation" correctly models closer to pre-IPO at 2.2 B.
However, let's look at another example. Take Nutanix (Series E valuation at 2 B, pre-IPO at 2.1 B). This model values it at 0.8 B on their table, almost a third of the IPO price.
There is no explanation forthcoming in this article as to why that's the case. This makes it seem like the Square example was cherry-picked.
I picked NTNX at random, so I don't know if it's the one exception. I'm not going to exhaustively check every result, however. I expect them to do that for me and not sell me a story without pointing out the terrible exceptions.
This is why the myth of "market capitalization" is so persistent. Often what you have at an IPO is a conversion of preferred shares to common shares. So effectively the 8 classes of preferred shares do become the same as the common, and the "simple" market capitalization number becomes real.
However.
How many startups never IPO? 99%? 99.9%? In acquisition or liquidation scenarios, those common shares are often worth a lot less than preferred. And because these scenarios make up a large proportion of the probability distribution, it means the expected value of common shares is a lot lower.
Even unicorns that are far more likely to IPO can raise bridge rounds that cause major dilution for the common shares, rendering previous market capitalization numbers useless.
However, let's look at another example. Take Nutanix (Series E valuation at 2 B, pre-IPO at 2.1 B). This model values it at 0.8 B on their table, almost a third of the IPO price.
There is no explanation forthcoming in this article as to why that's the case. This makes it seem like the Square example was cherry-picked.
I picked NTNX at random, so I don't know if it's the one exception. I'm not going to exhaustively check every result, however. I expect them to do that for me and not sell me a story without pointing out the terrible exceptions.