ummm, thank you, UPS. I feel much smarter now.

Today I was skimming through the Wall St. Journal, as is my wont, when a rather large ad spanning much of two pages caught my eye. It would seem that UPS "partners with Knowledge@Wharton to bring new and simplified insight to your business." ("Knowledge@Wharton"?? I am just waiting for my own graduate school alma mater to create some asinine, Web 2.0-ish nickname for itself and take up running silly ads. That would truly make my day. If the ad were foolish enough, I might memorize large chunks of it and quote it at parties).

Today's topic of enlightenment is "How VCs Capture Value From Start-up Firms." Now, this is a subject of frequent debate and great interest in my very own home, which is funded solely from income from a series of start-up firms which manage with varying amounts of luck to obtain and frivol away venture capital cash. As one can imagine, I read on with some interest, eager to hear the words of Associate Professor Andrew Metrick of the Wharton School:

When entrepreneurs want to start a firm, what sources of capital can they tap? According to Andrew Metrick . . . there are three. "The easiest is if you have the money yourself," he says. ["Duh", says I]. Second, angel investors -- people who know and trust the entrepreneur -- could provide funds. [I hate the recentish convention of calling investors "angels." That's a perversion of the old usage, where investors in plays or the arts were called "angels." One who invests in a play does so largely out of a love of the art, which is vaguely angelic as plays certainly do bring joy and interest to our lives, at least when we can hire a frigging babysitter. But someone who dumps a hunk of cash into a high tech start-up is just a more well-heeled lottery player, hoping to hit it big. That is self-interested, not angelic].. And third, institutional sources such as banks and venture capitalists (VCs) are professionals at giving out money to start-up companies.

Have you learned anything yet? I didn't think so. Next, Associate Professor Metrick, part of that awesome thinktank, "Knowledge@Wharton", turns his attention to a topic which has peculiar interest in our home, "Valuing Start-ups." He purports to explain the arcane reasoning by which a venture capital firm assigns a value to a company. The Sober Husband and I had a discussion on this very topic over the last week, precipitated by an offer from his CEO to buy out his small stake in the company. When I, a mere drunken housewife, argued with him that he should take the goddam offer before it evaporated, I used such concepts as net present value, the effect of inflation, and the statistical uncertainty of there ever being another event, such as a successful IPO or acquisition, which would yield another chance to turn those paper options into cash. But how would a real professional cover this ground?

Professor Metrick explains that VCs often use a 'quick and dirty method called the venture capital method of valuation. They look at the company and ask themselves -- if everything works out for this company, what will it be worth in five to seven years.

In other words, they guess.

Welcome to Silicon Valley, my darlings, where we all drink the Kool-Aid and talk as though we all knew things which are, in the final analysis, unknowable.