VCinJerusalem

Fred Wilson is at $5-7 Billion...How Much Would You Pay (to acquire) Facebook?

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...)??

How Much Would You Pay for Facebook?

Last Thursday I gave my annual lecture at the Entrepreneurship and Technology course at Hebrew University . This a wonderful "joint venture" of the Business and Computer Science schools at the university, and I have been participating for 8 years now. While I have yet to invest in a company "born" in the course, some companies have been created and received funding, and I have recruited team members that I met through the course.

While obviously I do this as a volunteer, I do get a lot of it, as it brings me in contact a few times a year with actual university age students...and I learn a lot.

This past week I asked how many in the room (there were about 100 students) have a Facebook account--every hand in the room went up!! I asked how many check Facebook once a day, most hands stayed up. More than once a day? Half the hands stayed up. More than five time a day? One guy with a laptop with 3G access card kept his hand up.

Then I asked the critical question: How many would pay $1 a month for Facebook...almost nobody raised their hand (ok, the guy who checks five times a day did).

As this post will also go up on Facebook, I put the question out to all: How many of the more than 50 million Facebook users would pay $1 (or more) a month to continue the service? Keep in mind, many of us pay $50 (or more) a month for wireless voice access [cellphone service], $50 (or more) for video content [cable or satellite TV], and another $40 a month for broadband at home. What's another $1? But most of us would not pay it for Facebook. Why?

Well, we look at Facebook as a cool application, very trendy, very Web 2.0 (even though I think the interface is more reminiscent of DOS). But it has NOT reached the level of mission critical utility, it is NOT an operating system. We still pay for SMS, but we would not pay anything for "Funwall" posts.

As you have heard from me before, the "ad supported"model only goes so far, and some point people need to start paying for things. Google has succeeded because they leveraged advertising in ways that nobody had done before...and they had first mover advantage. Difficult, but not impossible, to challenge them at their core game (search). Facebook is no Google. It's not even Yahoo!.   

Unless Mark Zuckerberg and friends can start to charge for something, or come to market with radically new ad paradigm, their financial health is in danger. But hey, I thought Google was a short at $100....;-)

Gary Snowman Comes to Israel

Once again, we have to thank our friends at Blueprint Ventures for making us laugh (at ourselves) in a wonderful holiday spirit. And a special thank you from this Israeli VC, for bringing Gary Snowman to Israel...and allowing us to help launch his latest adventure. Happy Holidays to all!

Facebook Free Zone, I am sorry to say...

Yes, I am not a fan of the overinflated valuation of Facebook, but I do recognize the momentary success of the platform--the burgeoning power and influence that social networking platforms such as Facebook can have in the world.

When we live completely in our bubbles, however, we can easily think the whole world is on-line, "friends" with each other. Not true.

I have spent the past three days in Athens at a conference. More than that I am not allowed to say about the conference, because, quite frankly, it would endanger many of the participants in the conference. I have spent three days in sessions and have not heard Facebook or any other social community referenced once. There was briefly a mention of a website, with a username/password, but no one seemed to know how to access it, and definitely not a source of networking.

Got me thinking, that Huntingon's "Clash of Civilizations" really should be be re-characterized to dividing between those who are on-line, and those who are not. And I don't mean if you have email, or a Blackberry. I mean those people who are prepared to share their thoughts, opinions, positions, with the global marketplace of ideas. To have comments publicly posted. To stop hiding behind walls and layers of secrecy and intrigue. To let the sunshine in.

One of the problems in my part of the world is that too much of the "real" decisions are taken behind closed doors, off-line, far from the public eye. On all sides.

I realize that even the Facebook generation at times needs a safe space, a private conversation. But the good side of Facebook, of blogs, of public web forums, is that it is there for all to see--once you have accepted to be my "friend," you are in. Once I make my blog public, I am exposing myself for all the world. No barriers--direct communication.

Even for the limited participants in this conference, how much richer it would be if stayed together as a community using any of the myriad of platforms available to us in this day and age. but somehow I fear that for many these 2-3 days were the limit - they are not ready to  really join the Facebook civilization. They are not ready to be known as my friend.

CEO needed for MEET, one of my favorite NGOs....

While I already posted this to Facebook , some people are still not there yet (Thank God), so also using this medium to shout out about a job opening at MEET . MEET is one of my favorite NGOs, MEET stands for Middle East Education Through Technology. Started by a group of MIT students, MEET is an example of doing, not just talking (or even worse, complaining).

When faced with the multi-generational conflict between Zionism, the State of Israel, and Palestinian nationalism, it is quite easy to get overwhelmed, frustrated, and burn out (believe me, have experienced all of that). And trying to "solve the conflict" can lead sometimes to disastrous consequences, such as the failure of Camp David II back in 2000. While we pray that the Annapolis ceremony will lead to actual progress on the macro level, true peace and coexistence will only come from programs like MEET.

I have watched MEET grow from idea, to pilot, to early stage start-up. Now they are moving to the next level, and if I was not otherwise engaged right now I would jump at this opportunity. It's that exciting. If you want to make a difference, or know someone like that, please urge them to be in touch with my friends at MEET. Details below.

CEO for MEET

Leveraging on MEET's expertise in technology and proven educational model we are looking for a CEO to lead the organization during an exciting period of growth, enhancing MEET's impact. The CEO will report directly to MEET's executive board and will be stationed in Jerusalem.

Position Summary

We are looking for a passionate leader with strong, performance driven management skills. The CEO will focus on developing and strengthening the MEET program and organization, preparing it for future growth.

For immediate consideration please send resume with both "CEO for MEET" and full name in the title to: joinus@meet.csail.mit.edu

Responsibilities

 

• Define short and long term priorities; turn them into a yearly work plan and oversee its implementation
• Introduce and manage key processes for sustainable growth
• Oversee and play a pivotal role in all aspects resource development
• Oversee implementation of current educational programs, managing a team of up to twenty international staff and volunteers
• Drive growth of current model and future developments
• Create a multi-year financial plan, manage all finances

Requirements

 

• BA or BS degree from a leading institution
• At least 3 years of proven track record in managing an organization/ business unit with at least a $500K budget and a team of 10 or more
• Demonstrated strong performance in prior roles, with increasing levels of responsibility and independence
• Strong teamwork and communication - able to lead and motivate an international team of employees and volunteers
• Superb organizational skills, ability to lead critical processes within a growing organization
• High level vision and strategic planning abilities
• Superb interpersonal and teamwork skills
• Independent, self motivated, a leader
• Results oriented, data driven professional
• Excellent presentation & sales skills
• Ability to achieve goals in limited time with limited resources
• Language skills: Mother-tongue level of written/spoken English; Knowledge of Hebrew/Arabic (both a plus)
• Interest in technology
• Passionate about working in the third sector

Role's Critical Success Factors

 

• Strengthening organization's structure and processes
• Raising resources for the organization
• Developing and cultivate sustainable relationships with all stakeholders
• Effective work with Executive board

Now this is a Great Take on Start-Ups in Late 2007

Not sure what this group's "business model" is, but you MUST check out this video (crank up the volume):

When Does a VC Mean NO

Besides my never ending Inbox overload, from time to time also "suffer" from deal flow overload --and the real problem sets in, which is failing to get back to entrepreneurs to say thanks, but no thanks.In other words, No.

My partner Lior Lifshitz  and I often discuss the difference between an American (read polite) and Israeli reaction to a company presentation. My American background has failed me over and over when trying to decipher the responses that some of our portfolio companies receive from VC funds all over the world. "Very interesting" could mean very interesting, but also could mean "I can't think of any questions, don't want to sit here and not say anything..."

The perennial " we will get back to you" could actually mean that, or it could mean "please never ever call us again."

And when does a VC actually just mean No? And does No mean No,or does it mean keep me in the loop and try and convince me.

What I can do is give you our take on this whole issue, and offer a recommendation that is limited to dealings with Jerusalem Capital, I do not deign to think I can speak for an industry.

We receive, on average, 10-20 new "deals" a week. Some are cold calls, some referrals. We will meet with five companies a week, both new ones and ongoing discussions (most of our time we reserve for existing portfolio). That's at least 60 yes/no decisions a month.

Now many of those are quite easy...not in the range of investments we make (above $1 million), not in areas we invest in (we do not do bio-tech, chip development, hardware development, classic enterprise software).

Then  we get to  the  deals which are potential deal flow for us...first we take quick look at material to gauge whether we have any interest... if so we schedule a meeting. But already there many fall through the cracks--lost in aforementioned Inbox overload. So feel free to send again, as of now email is free. I receive hundreds of emails a day (after cleaning out spam). Sometimes I forget to respond. Even to the deals that I am interested in!

Then we meet...and we try to determine is these are people we can work with -- if not, no reflection on them or the business, just our belief whether we will mesh well. In our business we need to work quite closely with our partners -- and not everybody can be partners.

After the "people" test comes our analysis of the business itself...and sometimes we are not sure. Usually breaks down that 1/3 of the time we say, we like the people, but don't agree with the business vision. 1/3 we are not sure, 1/3 we say, hey, maybe we can do this.

Then comes the difficult part--can we agree on partnership terms. Some in the venture/start-up world call this "valuation," I say partnership terms...at the stage we get involved in a company, it's silly to talk about inherent value. It's all blue sky.

So why do I mean with the question "When Does a VC Mean NO?"

Because anywhere in our process we could mean NO, but not quite get around to saying it. And then there are times when it may feel like we are saying no (e.g. emails not answered) but we really are just overwhelmed, or perhaps never even saw the email (that happens, email is NOT foolproof).

And when we say No, but keep in touch..it means just that. It means maybe we will do something down the line together, maybe the IDEA will change over time, or we will realize that there is a there there.

If we say a straight no, accept it. Probably means no. But we wish you the best.