To play Devil's advocate for a moment, Facebook's IPO will also create a bunch of millionaires, some of whom will want to become angel investors. So it might become harder to raise money from VCs but easier to raise it from angels because the rising supply of angels will counteract the tightening market.
Paul Graham's Letter to YC Companies
151–160 of 204 posts
Re: Paul Graham's Letter to YC Companies
#152I am confused why the FB IPO is considered anything other than a failure of bankers to price the stock correctly. Did anyone who actually understands Facebook's business today expect it to maintain a 100B valuation? Did any institutional investors throw money into it hoping it would rise up to 150B? If you invested in Facebook at the 150 P/E or whatever absurd value it was you deserved to get burned and hopefully are not investing in startups.
Re: Paul Graham's Letter to YC Companies
#153Am I the only one thinking that Facebook's IPO was actually a success? The point of the IPO is to sell your company shares at the best possible price and Facebook did it. Compare to an A/B/C round for a startup. If you know investors are willing to pay $50m for the round, but you settle for $25m, then you just lost $25m and gained nothing. I think the main reason FB is falling now, is not because the stock was not wo…
On day 1 it was a success, but now it is a disaster for several reasons.
1. It is harder to attract people to come work for you when you company's valuation is going down. Obviously FB can afford to pay for talent, but that cost just went up.
2. If FB ever needed to get more investment money, people may be more reluctant due to this situation.
3. If your company was getting acquired by FB would you want to be paid in cash or Stock?
Re: Paul Graham's Letter to YC Companies
#154Earlier quoted context omitted.
Social networks exploded because they created an interaction that previously wasn't possible. They have now become a tax on life - like email. A set of hygiene actions you have to perform every day. Do not underestimate how much the next generation does not want to conform to the restrictions of the previous generation. It's entirely possible future generations do not want to be tracked and targeted 24/7 - they may c…
Helping them pass the time certainly, and perhaps helping them get laid. You're dead right that each generation wants to be in a social space that feels "theirs", but I don't think that precludes using the same infrastructure. When I was a teen, I drove on the same roads and used the same telco and USPS as my parents, even at my most rebellious times. In Facebook's case, each user "feels" a tiny piece of the overall…
Terrible comparison, I use the roads because there are no other, better alternatives. When given a choice I always pick UPS or FEDEX over the post office for shipping, and looking at the financial position of the USPS I am in the majority.
Those industries exist because of the government monopoly, a new better social network can arise in an instant.
Re: Paul Graham's Letter to YC Companies
#155This seems ethically dubious.
I don't agree with the parent comment that I'm replying to, but I think this is a healthy skepticism to have. I don't think it deserves a downvote...
Re: Paul Graham's Letter to YC Companies
#156The problems in Europe are a more severe weight on the market (whether generally or for tech stocks specifically). By any rational logic, the Facebook IPO went well:
- the company raised a lot of money at a good price,
- the company remains valued at a high multiple (ie, even today valued on the dream not on the numbers), and
- I can imagine no better antidote for bubble muppets than the performance of the IPO
Bubbles can be fun but they're not healthy. Recent events are far better than a crash. It's just a correction. The emotional hand-wringing will last about as long as it always does, and be forgotten just as it always is.
Events in Europe may turn out much more severe than the minor impact to date. And they may not. But that's a bigger concern than the over-valuation of social companies.
Re: Paul Graham's Letter to YC Companies
#157Earlier quoted context omitted.
>>Recently I am seeing some 'xyz watched some on Social cam' kind of statuses on FB, of some xyzs who I am sure have not noticed such broadcast to their friends. These kind of mistakes, might just result in some very embarrassed and angry people. This is true. Since I observed this. I take care to log out of Gmail/Facebook/Twitter once I am done with them. And I never browse anything when I'm logged into into one of…
I don't logout, but try to open any links from within FB in 'incognito' mode.
There's a lovely browser addon called 'Facebook Disconnect' than blocks all third-party calls to the Facebook API. Available in Chrome and Firefox, and probably others.
Re: Paul Graham's Letter to YC Companies
#158Note incidentally that I'm talking about the performance of the IPO, not the performance of Facebook itself. I think Facebook as a company is in a strong position. The problem is simply that Mr. Market ( http://en.wikipedia.org/wiki/The_Intelligent_Investor ) doesn't think so at the moment.
Or perhaps Mr. Market thinks it's a solid, say, $25 or $35 billion company that was just way overvalued at the IPO valuation of $100 billion plus. There's certainly a whole lot of commentary along those lines in the financial press, like this example from a few days before the IPO: http://marketday.msnbc.msn.com/_news/2012/05/15/11702548-is-...
That's certainly a defensible position: the company is stable and profitable as is, but the current valuation has a lot of growth priced in, which could only be realized by growing revenue per user substantially, and they haven't yet demonstrated how they're going to do that.
Re: Paul Graham's Letter to YC Companies
#159Earlier quoted context omitted.
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.
In the next few months Facebook will create over 1000 new millionaires. Is it to much too assume that many of them will get into inventing, which could actually cause the opposite affect of what you're suggesting where there is even more money available?
Not sure if you meant investing or inventing (or both). But either one of those could have interesting implications in the valley.
Re: Paul Graham's Letter to YC Companies
#160Note incidentally that I'm talking about the performance of the IPO, not the performance of Facebook itself. I think Facebook as a company is in a strong position. The problem is simply that Mr. Market ( http://en.wikipedia.org/wiki/The_Intelligent_Investor ) doesn't think so at the moment.
You say Mr. Market doesn't think Facebook is in a strong position. How do you evaluate that? Facebooks Market value is 70 Billion. Its P/E ratio is 86. If that isnt an appraisal of a strong position, what is? Where do you draw the line?
Stock price.