41–50 of 51 posts
Does LinkedIn own a Webex yet? If they're going from a recruiting site to a full business-communications type model (archiving, in this case) they're going to need it.
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The good news is that since the employees owned some we can be sure that they saw some of that 119M$. That being said their site died :-) [1] Random note: It seems to me that that KK would be the appropriate unit for millions (thousand-thousands) and MM would be Million Millions or (10^12, or trillions.
If you do the math, very few employees will retire. FU money @ $7 million requires about 6% ownership. And that's assuming their wasn't a high multiple liquidation preference for any of the investors. [Investors here: http://www.slideshare.net/about/investors ] That's not to say a couple of hundred thousand dollars for being an employee isn't bad. But the chef isn't going to become a millionaire.
There is absolutely nothing wrong with shooting for a massive exit, but I don't think it is reasonable to hate on a multimillion dollar exit.
I just looked at LinkedIn's P/E. It's almost a thousand. How is anyone valuating the company in such a way that could even assume they would increase their revenues 50 times over in the next few years?
First, P/E ratio is the Market Cap/Earnings (earnings = profit)
The basic way to get earnings is to subtract all expenses from revenue. (this is an overly simplistic definition, but it is mostly right, almost all the time).
So you have: Gross Revenue - Expenses = Earnings
What is left out of this simple definition is "operating leverage". Operating leverage is the concept that you have a set of costs that don't move much no matter how much your revenue moves. Most internet companies have a lot of operating leverage.
So lets take a hypothetical company:
Quarter 1: (Revenue) $100m - (Expenses) $99M = (Earnings) $1M ..... All with a market cap of $100m, the P/E would be 100.
Now, if expenses are mostly fixed, (think lots of engineers salaries which have most everything running in macros etc.) and the revenue increases by 5% what is the new PE?
Q2 $105m - $99m = $6m .... all with a market cap of $100m, the new P/E would be about market average of 16.66
--You could do the same example if you drop your long term projections on R&D, or acquisitions or any number of expenses.
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P/E is market cap divided by profits. Your comment about increasing revenues by 50x is non-sensical. Consider a company with $100M in revenue, $1M in profit, and a market cap of $1B. PE is 1000. Now say this company has a shot at doubling revenue in the next few years without incurring additional cost. They will then have $200M in revenue, $101M in profit, and the PE will be 10. Just looking at P/E in isolation is li…
Consider a company with $100M in revenue, $1M in profit, and a market cap of $1B. PE is 1000. Now say this company has a shot at doubling revenue in the next few years without incurring additional cost. They will then have $200M in revenue, $101M in profit, and the PE will be 10. Can someone provide a concrete example of a company that has doubled revenue in a few years without incurring additional cost? I realize th…
It is not uncommon for small pharma companies to have 1000% increases in revenue with little cost increase, especially if the companies don't manufacture or do marketing and just take royalies from big pharma.
[1] My memory is not perfect, but I was invested at the time and paying close attention. I remember being blown away that their revenues doubled and they only cost they added to the business was mostly non-search related activities.
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I fell for the same thing myself a while ago; the rules actually are different when you're selling something with zero marginal cost. As long as you believe LinkedIn can increase their revenue without adding to costs, their current P/E is kind of irrelevant. This is why investors basically hate consulting companies (since revenue/earnings scale linearly -- in some ways, sub-linearly, since you have to hire more layer…
the rules actually are different when you're selling something with zero marginal cost. I don't think there is any business that sells something with zero marginal cost. Even if LinkedIn grows significantly without any marketing and sales activities, they still must deal with: More users == more servers More users == more support staff and on and on. Use Google and Facebook as classic examples. And if you aren't gett…
Earlier quoted context omitted.
The good news is that since the employees owned some we can be sure that they saw some of that 119M$. That being said their site died :-) [1] Random note: It seems to me that that KK would be the appropriate unit for millions (thousand-thousands) and MM would be Million Millions or (10^12, or trillions.
Mille, i.e. Latin for a thousand. Thus MM = 1000 x 1000 = 1,000,000. I rarely see MM used to denote a million outside the financial world. I have never seen a job, for example listing remuneration as "circa 120M" meaning 120,000
Wow. 3MM raised, 119MM exit. 40x return, and they made that 3MM last 4 years from 2008-2012 with revenue. Congratulations!
Wow. 3MM raised, 119MM exit. 40x return, and they made that 3MM last 4 years from 2008-2012 with revenue. Congratulations!
What's your source of 3MM revenue for 2008-2012?
Does LinkedIn own a Webex yet? If they're going from a recruiting site to a full business-communications type model (archiving, in this case) they're going to need it.
Webex is owned by Cisco for a long time already I did not hear anything about their intentions to sell.