While your post is technically correct in terms of how a DCF works, it is also emblematic of a pervasive misunderstanding within SV about how valuation works and especially how institutional investors (the people who control most of the money in the stock market) approach valuation.<p>Financial models, <i>especially</i> DCFs, are useful as a framework for comparing similar assets against each other -- whether it&#x27;s two software companies or two oil refiners.<p>On the other hand, using DCFs as a tool to derive the &quot;true&quot; value of a company&#x27;s equity is a mistake. Similarly, imputing truths about the drivers of a given company&#x27;s DCF valuation -- e.g., <i>g</i> in the Gordon growth model -- based on the value of that company&#x27;s equity in the financial markets is also a mistake.<p>The recent explosion (last 5 years or so) in private company valuations is more a function of a global thirst for yield than investor expectations that any given company will be producing free cash flow of <i>a</i> in year <i>x</i> or <i>b</i> in year <i>z</i>.