On Aug. 20, 2011, Marc Andreessen published the definitive manifesto for a generation of technologists and investors, with 'Why Software Is Eating the World.' It kicked off an era of immense enthusiasm for software startups, coinciding with a period of historically low interest rates. Andreessen's sentiment lines up with reality: At that time, the risk and potential associated with high-growth software companies were not well understood or adequately reflected in the financial models used to compute valuation. The sheer momentum of software investment over the following years encouraged the growth of private capital inflows, allowing startups to stay private for longer. Valuation was seen as an arbitrary milestone on the road to IPO as investors ratcheted up the price and exit expectations to produce ever more impressive (paper) returns. Somewhere during this period of easy money and endless growth, investors stopped thinking seriously about valuation. All that mattered were comps...
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