How Does the Concept of “Network Effects” Influence Comps Analysis?

Network effects significantly influence Comps analysis because they are a key driver of long-term value. A project with strong network effects, where the value of the network increases exponentially with each new user (e.g. a dominant Layer 1 blockchain or a major DeFi hub), should command a higher valuation multiple than a project with weak or non-existent network effects.

Analysts must adjust the Comps multiple upward to account for this defensible, self-reinforcing growth advantage.