When small start-ups I’ve spoken with do make money, they often find it difficult to recruit additional investment because most venture capitalists — and often the entrepreneurs they finance — are not interested in building viable long-term businesses. Rather, they’re interested in pumping up enough hype and valuation to find a quick exit through an acquisition at an eye-popping premium.

Getting acquired while producing no revenue is like performing a card trick without the deck of cards: the magician simply explains how magical the trick is, never actually showing it. (And we are supposed to step back in sheer awe.)

For start-ups, fewer numbers in the equation mean a projected valuation can be plucked out of thin air.

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The term often used behind closed doors with this no-revenue formula is mark-to-mystery. This is a play on the common term for a more logical investment practice called mark-to-market, which is used to create a realistic appraisal of a company’s financial assets.

“V.C.’s can create this mark-to-mystery valuation because as long as there are no numbers, I can have whatever mark I want for an external valuation of a start-up,” Mr. Kedrosky said.