because "down rounds" not only dilute you horribly... I'm missing something here. What makes "down rounds" so dilutive? I'm assuming we're talking about a larger effect than the obvious "lower valuation = handing over more stock to raise the same amount of cash" effect.
The liquidation preference also bites you more as a founder because you are further away from not being affected by it.
I am not sure about this but I can imagine the down round VCs also want the same exit valuation guarantee, i.e. if first round got 1x liquidation preference at $8M valuation the down round VCs in a $6M round might ask for 1.33x liquidation preference.
I don't think they've even tried to make money yet. They've just been focusing on growth. But they have so many users now that they could do whatever they want. Ideas that would entail a chicken and egg problem for anyone starting from scratch (e.g. marketplaces) do not for them. Plus Mark himself is such a fearsomely effective person. And so young; he's only a little older now than Larry and Sergey were when they st…
Yes. Wall Street grades Facebook by drawing lines through dots of revenues and margins. The more accurate way to view Facebook is as a powerful coil that can spring in multiple directions. (I say this as someone who questions whether Facebook is a positive force on the web).
This is a cryptic comment. Yes, Wall St views Facebook as a powerful coil, but no one knows if it is compressed or stretched, but it certainly is.
All it takes is for Facebook to go from $4 a user/yr to $8, or for teenagers to say "email me, I don't check facebook often". A powerful coil indeed.
"The best solution is to not need money. The less you need investor money, the more investors like you". That's true if you are dropbox, airbnb and other startups that have a solid revenue avenues other than advertising. If twitter or facebook itself had been founded after that disastrous ipo (facebook ipo) they would be in a worse position than dropbox or airbnb in terms of funding and revenue. That said, i think fa…
There is a fundamental problem with the way the web is working now. We're in a kind of limbo. Companies like Dropbox and Airbnb (and the company I mostly work with) actually sell a product and as you say they're good.
I've been having a hard time formulating what I'm about to write so I apologize if it doesn't make a lot of sense. I can't help feeling that the Facebooks and Twitters are using the web in a way that there really isn't a proper infrastructure for. They seem to be quite expensive to maintain and, by nature don't generate lots of money by what they do. In my opinion, if they charged they wouldn't be able to build the big networks of interconnected users that defines their value.
I think there are ways past this conundrum but I don't think that profit motive will be the what pushes them and I think they will require a somewhat different infrastructure than we have now.
I don't think they've even tried to make money yet. They've just been focusing on growth. But they have so many users now that they could do whatever they want. Ideas that would entail a chicken and egg problem for anyone starting from scratch (e.g. marketplaces) do not for them. Plus Mark himself is such a fearsomely effective person. And so young; he's only a little older now than Larry and Sergey were when they st…
But I think, its now going to be all the more tough for them to figure out how to improve their ARPU dramatically, as they don't have the benefit of obscurity. For example, even slight change to the feeds, like inserting what vaguely seems like an Ad, raises a huge uproar from people. In contrast Google had got Adwords figured out (but it was not as widely known) before their IPO.
FB already got their $16 billion. If your in it for the long term, uproar away that nest egg should be able to last a while. Check ins, ads, app platform, lots of monetization strategies. The only people burned are short term investors who buy in at a bad time. FB ONLY potential problem is losing RELEVANCE. You don't lose users by not monetizing mobile, but you can lose users by monetizing mobile however. Short/steady wins the race, especially with 16 billion in the bank
> I think Facebook as a company is in a strong position. Just curious, but I'd like to hear your opinion on why this is the case, vs all the naysayers that are betting against the company now. Do you have any specific point you find that Facebook can leverage to maintain success?
Just for perspectives on "all the naysayers that are betting against the company", the percentage of stock on loan (e.g. for shorting) for Facebook was about 1% versus 5.3% for Zynga and 4.1% for LinkedIn as of May 23rd (the most recent I have data for) per Bloomberg. LinkedIn for one, despite way more short-sellers than FB and despite the past month or so, still seems to be doing okay despite "all the naysayers that…
Get updated numbers, the crash the past 2 weeks have came from shorting the stock.
Out of curiosity, why is it that Facebook's IPO would hurt early stage valuations, when all of Facebook's early investors made hundreds of millions or billions of dollars? I could see it getting harder to IPO at a good valuation for a few years, but that shouldn't drive down early stage valuations all that much. Also, to me the most interesting thing to watch (beyond Spain) is these new crowdsourcing laws going into…
I suspect it's because investors think that one of the few routes to 'exit' a company and cash out your investment just got closed down, at least in the short term. That increases the risk of investing and therefore lowers the valuation.
Certainly the path to IPO is so long that someone seeking VC funding today won't be in a climate defined by Facebook. For all its faults, SOX did kill the "retail VC" style of IPO popularized in the last bubble. Getting to IPO now is a very long road.
Facebook waited too long. Part of the psychology on joe public's love of Apple has to do with APPL -- they got to invest in the stock while investing their time (and $) in their products. Facebook decided to have all that growth in value for insiders only. And it's not like they wanted to be a private company, so the outcome is planned. By not leaving any money on the table, and having joe public not share and invest…
Mmm, I disagree about psychology of investing stock, time and products together - in Aus, there's a lot of Apple love but little investment in it's stock. Doesn't harm the brand... In the end, investors may like a good stock but customers just like a good product.
I think the thing that people need to remember is that Facebook really only IPOed because the had too. If Google had tried to wait things out as long as Facebook did, then it's quite possible that it would have IPOed near $100b (Sep 2005) and grown to the $200b they are at today. The money that was there to be made in the Facebook IPO was made before Facebook went public in the secondary market. For professional inve…
true wrt filing, but still doesn't change that the market doesn't value Facebook at $100b. The current P/E is just too high. Will Facebook get back to $100b and beyond? yes as soon as it starts making more money.
I don't think anyone disagrees that the P/E is way too high.
Some people (including me) just think the E is going to move up, rather than the P move down. I made this mistake with LNKD -- thinking it was an absurd P/E, not realizing that the costs were relatively constant and that increasing revenue would produce huge increases in profits.
Considering PG didn't strike down the story I presume to think he expected it to leak out or didn't ask it to remain confidential. Re: "Semantic Scramble", this was/is used quite successfully in a university course I tutored. Students are supplied with Java code featuring a unique comment style (/ * */). So many students blindly copied code out of another student's assignment and submitted it as their own that we cou…
Or pg realizes that once the cat is out of the bag, you can't put it back in. If he takes it down here, it will be posted elsewhere.
At least this way the cesspit that is Business Insider doesn't get any extra pageviews from YC.