For Internet enterprises, P/MAU coverage is the widest, and P/E coverage is the smallest. Here, we use the term "order of the valuation system" to represent the coverage system. Among them, P/MAU belongs to the low valuation system and has the highest tolerance; P/E is a high valuation system and has the highest requirements for enterprises.

Under normal circumstances, if the enterprise has no net profit, it can be valued by sales revenue, and if there is no sales revenue, it can be valued by the number of monthly active users, and the ultimate goal is that traffic can be converted into revenue and revenue can be converted into profit.

Why do some companies "die" at the Series B or Series C funding stage? Because some companies have a large amount of user traffic, but the traffic cannot be monetized. Suppose that in the B round of financing, the investor is valued at 0 according to P/S, and if he cannot obtain financing, he will naturally "die". And some companies have a lot of income, but they can't make a profit. Suppose that in the C round of financing, the investor is valued according to the net profit, and the company's valuation is 0, and the meta-method obtains financing, which will also "die".

The scope of use of the valuation system shifts from one economic cycle to another. In a bull market, the valuation system will move backwards, in which case companies that have not made a net profit for a long time will continue to receive financing, and the investors are traditional investment institutions. Because at this stage, the investment institution uses the P/S valuation method to value the enterprise. In a bear market, the valuation system moves forward, in this case, even if the company has a large number of users and a good income situation, it will not be able to successfully raise funds, and can only merge and restructure to avoid being eliminated from the market. Because at this stage, most investment institutions attach great importance to corporate profits and no longer use low-level valuation systems to value enterprises.

Policies in the secondary market guide the valuation methods of investment institutions. There has been a shortage of RMB VCs in China, and the reason for this is that the Chinese public market only recognises the P/E valuation system. The GEM issuance rules are as follows:

Profit for two consecutive years, with a cumulative net profit of not less than 10 million yuan;

The net profit in the past one year shall not be less than 5 million yuan, and the operating income shall not be less than 50 million yuan.

Only when these conditions are met can the enterprise be listed, and the enterprise value can be recognized by the secondary market.

For companies, this valuation system is too demanding. Because under this valuation system, even if the enterprise has a large number of users, a lot of revenue, and a profit of 0, the enterprise valuation is 0. This is the main reason why there are a lot of PE in RMB and very few VC. Because under the call of the government, investment institutions have chosen the P/E ratio as a tool, otherwise they will lose the exit channel. However, U.S. stocks and Hong Kong stocks are equipped with P/S test indicators, and companies can be listed when they reach a certain scale. If the company is only valued according to P/S for a long period of time after listing, it can make the company grow smoothly and make each round of valuation smooth.