So, Tesla has only produced three million cars, yet it’s valued at about $700 billion dollars whereas Toyota which produces ten million cars annually is valued at a paltry $285 billion dollars, just a third of Tesla. The argument is that Tesla will be able to control so much of the value chain, for instance, the battery charging stations and so that’s why it’s valued so highly. The CEO of Tesla Elon Musk has said he plans to set up new factories in the United States and Canada, and that means a reshoring of more manufacturing jobs to the developed countries of the world. Of course, there is this perception of Elon Musk as an arrogant billionaire and an Australian politician has described him as such, but really, Tesla is valued so much more given that Toyota has also started developing electric vehicles.
The question to ask then is what really goes into a Startup’s valuation? What makes some startups valued so highly while others, even with sound business fundamentals are valued at such paltry amounts? Let’s start with the billion dollar farm. The billion dollar farm was practically unheard of but if it existed, it could practically employ the whole world. The agrarian revolution ushered in the age of the millionaire, but that has changed so much today with a wealthy farmer needing to farm on hundreds of thousands of acres. Then we moved to the billion dollar factory. This employed about 20,000 people and it could sustain local towns as it paid salaries to the local population which was the main employee catchment area. The beauty about the billion dollar factory is it employed anyone from a grade two drop out to a high flying doctorate holder.
Then came the billion dollar software company. This employed about 500 people and it was mostly Uber Private, flagship state university graduates, and the Ivy league and peer graduates. This is the age when employee share ownership schemes started being implemented and a company such as Microsoft was able to create 12,000 dollar millionaires from it’s employee share ownership scheme. Then now we are in the billion dollar startup, a company that employs just twelve people, sometimes had no profits, even no revenues, or is even just an idea on paper and is valued at a billion dollars. And then, in future, we could have a billion dollar owner manager robotics company. A company that has only the owner and robots, and with AI, this could wipe out the whole middle class work force, hollowing out the American middle class in ways never seen before.
mabinda.com Business, Education, Technology Commentary. 
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