Why Acquirers Overpay, and What It All Adds Up To

Fast growth makes a startup doubly valuable to acquirers. First, the growth itself is worth buying. Second, a fast-growing company is dangerous: left alone, or bought by a competitor, it might grow into a threat to the acquirer's core business. Fear sets a floor under the price.

This is why startups get offers that look irrational against current revenue. The buyer isn't pricing the present. They're pricing the compounding, plus insurance against it happening to them.

Zoom out and the picture is coherent: growth defines the startup, the weekly rate steers it, evolution improves it, VCs fund it, acquirers pay up for it. One quantity explains the whole ecosystem. PG's conclusion: understanding growth is what starting a startup consists of. You're an economic research scientist hunting for one of the rare ideas that can grow like this.