ProblemA startup may have no profit because it is buying speed, learning, or distribution.
PrincipleValue the path to a power law outcome, then discount brutally for execution risk.
UseLook at market size, growth rate, margin potential, retention, and the reason this team could win.
Value the path to a power law outcome, then discount brutally for execution risk.
The move
A mature company is valued on cash it can produce. A startup is often valued on what it could become if the uncertain parts resolve.
That makes the judgment more narrative, but not random.
The drivers
The key questions are market size, growth velocity, gross margin, retention, customer acquisition, and strategic control.
Profit matters later. Unit economics and learning speed matter early.
Use it
Do not ask only whether the startup is profitable. Ask what evidence reduces uncertainty and what milestone should change the price.