Tech startup valuations are dumb, part 1

March 26, 2019 (196 words) :: McDonald's $300m purchase of Dynamic Yield captures how startup valuations have become increasingly unmoored from any desirable reality.
Tags: startups

This post is day 85 of a personal challenge to write every day in 2019. See the other fragments, or sign up for my weekly newsletter.

I don’t really have much to say on this other than what’s already in the Bloomberg story: McDonald’s $300 Million Tech Deal Is Its Largest in 20 Years

McDonald’s Corp., in its largest acquisition in 20 years, is buying a decision-logic technology company to better personalize menus in its digital push.

[…] With the new technology, McDonald’s restaurants can vary their electronic menu boards’ display of items, depending on factors such as the weather – more coffee on cold days and McFlurries on hot days, for example – and the time of day or regional preferences. The menus will also suggest add-on items to customers.

And you know, I’m sure someone ran the numbers and figured out that this startup’s technology would, over a long enough time period, generate enough of a lift in sales to actually merit this $300m+ price tag. I’m not saying that it’s an irrational purchase; I’m saying that it could be both perfectly rational and a horrific allocation of money and resources on a societal level, because “helping McDonalds sell more sugary crap” should not be worth $300m of society’s collective attention. We live in hell.

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