I agree that valuations are too high for companies with low or nonexistent revenues. However, this analysis ignores a) startup ideas and their opportunities are unique and b) markets are winner take all.
You lost me with the trickle-down argument, “So if Twitter is worth $25 billion and its size is X,” thinks the VC to himself smugly, “this other startup must be worth $250 million because its size is 0.01X.”
Is the other startup doing something as unique and compelling? And does that startup have the opportunity to own that equally unique and compelling space outright?
Twitter's valuation is born from its opportunity to be THE real-time information platform for the web. I would argue that Snapchat's opportunity (to be yet another photo social network) is nowhere near as compelling.
Sure, valuations are too high across the board, but I do not see Twitter's IPO as bad for startups. If anything, it shows that unique concepts with the opportunity to own their market globally are highly rewarded by the public markets.
As is often the case, I agree with much of your content, but take issue with your sensational headline :)