Here’s a thought experiment about a theoretical company that can obtain incredible valuation.
You start out with some money from friends and family, and you use this money to sell $100 bills for $50. Lots of takers.
Soon enough, you go to a VC and show them your revenue stream, and tell them with more capital you can make the margins much better. They hand you a few million, and you start selling more $100 bills for $70 instead. Wow, you’re reducing margins and seeing insane sales growth!
A few more investments later and you’re selling $100 bills for $95 en masse. You have ads everywhere, your IPO and ICO are coming up. You probably have a few billion in funding from SoftBank.
Your stock price skyrockets because you’re THIS CLOSE to showing profitability and if the trend continues you’ll be making billions.