It is true that there is a limited supply of potential breakout startups. But by monopolizing the market for iPhone components, you can only charge 2x-3x times as much for the product. You aren't going to make tons more money, like if you invest in breakout startups.
The point is more that a16h realizes most of its returns through the small percent of startups that do phenomenally well. These startups have a higher expected valuation, because of potential extrema values.
So a16h is trying to correctly valuate the top 1% (for example) of startups, not that top 5% of startups. This means that the valuations (in this example) could be ~5x more than is what is conventional, and still be accurate valuations.
It is true that there is a limited supply of potential breakout startups. But by monopolizing the market for iPhone components, you can only charge 2x-3x times as much for the product. You aren't going to make tons more money, like if you invest in breakout startups.
The point is more that a16h realizes most of its returns through the small percent of startups that do phenomenally well. These startups have a higher expected valuation, because of potential extrema values.
So a16h is trying to correctly valuate the top 1% (for example) of startups, not that top 5% of startups. This means that the valuations (in this example) could be ~5x more than is what is conventional, and still be accurate valuations.