There are other factors, of course. A company like Uber has demonstrated that it can expand into new markets across the world. But one of the most compelling things it—or any private company—can show investors is that people are using the service. Put simply: A lot of users translates into a lot of cash. And investors want to see that kind of "super high engagement," Hippeau said. "WhatsApp, at the time that it was purchased by Facebook for $19 billion, it had already 500 million monthly active users. It used to take a decade for anybody to have engagement of 100 million users. Now you can get there in a year or two. That's the case with the latest companies such as Snapchat. I think Snapchat is close to 200 million [monthly active users], which, if you then compare [Snapchat's valuation] to WhatsApp, seems like a relatively reasonable valuation."
Or, as Christopher Mims put it in The Wall Street Journal late last year:
That’s why I’d urge caution for anyone looking at these companies, at any stage. It’s common these days to talk about whether a startup is in line with its “comparables,” in terms of revenue and spending, but that’s a measure unhinged from fundamentals in a market that’s overheating. When the correction comes—and it will—here’s what will go first: All the companies whose markets weren’t, in retrospect, as big as claimed.
And without the public documentation that might confirm some of the numbers floating around about Snapchat—like the 200 million monthly user figure—it's hard to differentiate what's real from what's hype. "We haven't ever shared or confirmed our user number," Snapchat spokeswoman Shannon Kelly told me, "but I can tell you that there are roughly 700 million Snaps sent daily and about 1 billion Story views." Which, like a $19-billion valuation, sounds impressive but doesn't mean much without context. (For instance, do those 700 million daily Snaps include spam accounts, which are still rampant on the app? And does that figure double-count the same Snap a person sends to everyone on her friend list? Even when companies do offer numbers—WhatsApp noted the 500 million mark for monthly active users in a short blog post last spring—there are many questions left unanswered.)
Of course, the ability to be selective about what information a company shares with anyone outside the company is one of the big perks to staying private. And it's easy to see the appeal from a business standpoint. "It's a different kind of market today," Hippeau said. "Given the crazy regulations that we now have in place post the dot-com crash, regulators have put all these rules in place that make it really unattractive in a lot of cases to go public. Companies are trying to [stay] private as long as they can."
At last count there were 50 American companies valued at more than $1 billion that still haven't gone public, according to an ongoing count by The Wall Street Journal and Dow Jones VentureSource. All this—the spotty public information, the massive cashflow into Silicon Valley, the mega-valuations—tends to congeal into a mostly unanswerable question that gets asked all the time anyway: Is it a bubble? "Here's your wake-up call," Henry Blodget, the former equity analyst and Business Insider CEO, wrote last week. Then again, it's probably not a bubble, he wrote three days later.
Not yet anyway. The likely reality is, the more time that passes since the last bubble, the more nervous people get about the next one. (And for good reason, lots of investors say!) But it's anyone's guess when that will be. And in the meantime, as tech companies demonstrate they can scale globally—or at least relative to their peers—and expand into new markets, the billion-dollar price tags will continue to appear.