We celebrate universities as great societal equalizers. They seek to weave together a smart, hard working and diverse cross-section of the young population. They send thousands of graduates each year on a path to elite opportunities in tech, finance, academia, etc. It’s often called a young person’s American Dream.
But it’s not that rosy. Elite schools are the gatekeepers of high society. It’s never been harder to get into, let alone afford, an Ivy League college. The Ivy League collectively admits ~5K students each year, yet there are nearly 5M 18-year-olds in America alone. As an investor, the #1 challenge I hear from founders is difficulty finding qualified talent. That’s no surprise if your metric for “qualified” is that they attended an elite college, reflecting their academic performance from age 14 to 17.
Ivy league education costs a staggering $70K+ per year per student and is rising at twice the rate of inflation. Even with financial aid, it’s far beyond the reach of many young people.
Price-to-sales is a financial metric describing how much value the market places on each dollar of a company’s revenue. Analysts often use a low P/S ratio relative to peers to identify undervalued equities. NYU research tabulated average public company P/S ratios by industry in Web2:
Multiples in private markets are far higher than the public multiples with 100x ARR becoming the meme of software investing in 2021. But 100x isn’t the high water mark: competitive deals frequently traded at 500 or even 1000x revenue. These multiples bake in stratospheric growth expectations. The record amount of VC dry powder is certainly a factor as well.
Now let’s talk about revenue multiples in crypto. A protocol’s revenue is the sum of all fees paid by its users. Price-to-sales in crypto is protocol revenue divided by fully diluted market cap.