Hate to stay on the Facebook subject, and I promise I will not return to it for some time (say, until Facebook is profitable....) but just saw this short interview with Fred Wilson in Business Week (here) and caught him saying he thinks acquisition price for Facebook just now is at around $5-7 Billion. Now if that is the acquisition price, the private round investment should be at much lower valuation...but Microsoft is not really a rational player, I guess. I still think even Fred is over the top, but I guess I he is factoring in all the momentary hype value.
We are going through a round right now for one of our portfolio companies, which we believe is a path breaking company in an area where real money is being made right now. There is no hype value, because the company is not consumer facing--which means it actually has to build a real business case before it will have major jumps in value. Thank goodness for us and our investors, we will get a nice bump up in value terms from when invested (little over a year ago)--but nothing like what Facebook investors have seen. But we are still thrilled with our success, and happy for them!
Valuations are a dark art,and acquisition prices of pre-profit companies even more so.
So ask yourself, would you buy Facebook right now for $7 Billion (assuming you had the cash to spare...)??
Depends if it makes me change our current financial spreadsheet. Which I doubt because it still isn't a real business with earnings.
Posted by: Peter Cranstone | December 27, 2007 at 01:59 PM
Just to mention another user facing company with no clear business model and a lot of hype, think about Google.
People used to be skeptic about Google too.
Go back to end of 04 and find a lot of articles claiming GOOG will never cross the $200 per share. I'm sure these people would have wanted to erase these predictions as Google is now over $700 per share in case you've missed that.
BTW, the Market Cap on Google is now >$200B.
Do you now think it was a good idea to buy them right after the IPO? Would have been a nice upside for JC.
When disruptive things come out it's really hard to imagine their value. I do think that Microsoft is nothing but irrational about this and I'm sure they have the right brains in place to look at it with careful eyes.
Just my two cents...
Posted by: Yaniv | December 30, 2007 at 02:00 PM