1. Phenomenal user growth showing no signs of slowing down.
2. A super impressive team.
3. A great product that people raved about.
4. Plausible exit opportunities that could be attained either with- or without generating revenues beforehand.

#1 is probably the most relevant… if user growth is fast enough, most rules go out the window, and power shifts from the investors towards the entrepreneurs. VCs lose the ability to dictate requirements (such as “you must start making money”) when there are too many of them clamoring to get into the deal. The negotiation turns into something like this.

When you’re growing as fast as Slack, you don’t have to justify your valuation with numbers or multiples or whatever. The quantity of investors that want to put money into the deal is nearly endless. It’s merely a matter of supply and demand.

The process in hyper-growth companies like Slack is more akin to this:

Stewart (into a loudspeaker): “Okay you bastard VCs. I need to raise one hundred and sixty million dollars. I’m going to let five of you invest in my company. How many of you will invest at a $2 billion valuation?

VCs:  (485 arms raise in the air)

Stewart: hmmm ……that’s too many. What about $2.5 billion?

VCs: (65 arms are still raised)

Stewart: 2.7 billion?

VCs: (8 arms are still raised)

Stewart: “Nice almost there. What about $2.8 billion?”

VCs: (3 arms are still up)

Stewart: Damn too far the other way. Let’s meet in the middle, plus a little extra for me (muahahaha) $2.76 billion? 

VCs: (5arms are still up)

Stewart: Alright great. Thanks for coming, you filthy animals. I’ll have my people send your people the paperwork. ”

Obviously this is satire, but just to paint a picture for you)

By Patrick Mathieson for Doba Capital

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Point is: how much of it is instinct and how much is number crunching?