> So if some of the super-angels were looking for companies that could get acquired quickly, that would explain why they'd care about valuations. But why would they be looking for those? Because depending on the meaning of "quickly," it could actually be very profitable. A company that gets acquired for 30 million is a failure to a VC, but it could be a 10x return for an angel, and moreover, a quick 10x return. Rate of return is what matters in investing—not the multiple you get, but the multiple per year. If a super-angel gets 10x in one year, that's a higher rate of return than a VC could ever hope to get from a company that took 6 years to go public.

Very true, but this model doesn't seem sustainable to me, unless I greatly underestimate the number of companies that could provide that "quick 10x return" (or unless the amount of money invested remains small and constant year-to-year).

Imagine you start with $10M in investments this year and make 10x. To make the same return next year, you've gotta find enough companies capable of a 10x return to invest all $100M you now have. Should you succeed, the following year you'd have $1B to invest. In a very short amount of time, your limiting factor switches from the amount of money you have to invest to the number of quality companies you can find to invest in.

It seems their rate of return is going to significantly decrease, year after year, until they're forced to change their strategy to one more in line with what the VCs are doing.