Wednesday, November 26, 2008

Are Twitterers worth more than Googlers?

Following up with an additional thought on the Twitter/Facebook saga... In yesterday's article, I approached Twitter's valuation from a "per twitterer" basis - arriving at an estimated value of $45 per twitterer based on Facebook's $500 million which is really worth $150 million using the "Henry Blodget Facebook valuation discount factor."

To put the $45 per user valuation in some perspective, Google's market cap is about $90 billion based on today's opening share price. Public estimates out there show that there are approximately 1.4 billion people in the world on the Internet. Let's discount that to 1.0 billion just in case that includes people that can access once a week or month, or people that can access email and aren't able to regularly use search. At about 70% market share in the search business, that comes to abut 700 million people.

$90,000,000,000 / 700,000,000 = $128 per Googler

If one assume that Facebook's $500 million offer was indeed a legitimate $500 million and not an $500 million in inflated currency, the price per twitterer that Facebook is $150 per user, which would mean that Facebook is valuing Twitter's users more than the market values Google's users. Twitter doesn't have a revenue model. I think Google does...

(Interesting side note - the first search result for the term - "how many people use google everyday" - is a forum post on from May 31, 2006. Still some room for improvement and not surprising that problems like this crop up from time to time...)


Tuesday, November 25, 2008

"No Thanks!" in 140 Characters or less

Maybe the message was something like:

Twitter: @Facebook "No can do. Thx 4 the offer."

It's common knowledge now that Twitter declined Facebook's "$500 million" offer. Running some numbers yields some interesting results on the offer and valuations of both companies. (We'll come back to the quotes around the $500 million shortly...)

Back in April, Michael Arrington wrote that Twitter was worth between $60-$150 million just before it closed it’s $15 million venture round at the end of May.

TwitDir shows that there are “3,328,420 twitterers we know!” as of the time of this article. Using the $500 million offered by Facebook for Twitter and some simple math, this would equate to a valuation of approximately $150 per twitterer. Not sure if I’m buying that (pun intended….).

Henry Blodget did some interesting analysis on the real value of the Facebook offer, since the $500 million is “overvalued Facebook stock” based on the $15 billion valuation. There are lots of ways to slice and dice Facebook's valuation (including my own perspective based on the "Facebook Multiplier"). Blodget estimates that Facebook’s correct valuation is closer to $5 billion, thus decreasing the real value of Facebook’s offer down to $150 million, or $45 per twitterer.

At $45 per twitterer, which is probably a more realistic number to use, two questions:

1. How would Facebook earn back the $45 per twitterer in future value terms?
2. What does Twitter have planned that makes them think they can do better than $150 million.

Just my opinion, but:

1. I'd guess that Facebook isn't quite sure what it'd do - sort of feels like Yahoo! in a way. Good on eyeballs and users, not so good with the whole revenue thing.
2. Twitter isn't so sure either, but knows that there's a better deal out there than $500 million in monopoly money. Just because they turned down this deal doesn't mean they turn down the same amount or less from another enterprise.


Thursday, November 20, 2008

Michael Lewis - "The End"

Just in case you missed it, here's an interesting piece from Michael Lewis, author of Liar's Poker (a book about Wall Street back in the 1980's that you should read if you haven't). His new article - "The End of Wall Street's Boom"- is a new perspective on the current financial market situation. It's about 18 pages printed, so grab a cup of coffee first.

(Chris M. - thanks for sending to me...)


Monday, November 17, 2008

Learn How to Sell

Spent the evening in the office getting some odds and ends worked out. I often listen the the podcasts on the Entrepreneurial Thought Leader Lectures to help make the time more productive.

This evening, I listened to this podcast from Steve Blank, who fastidiously suggested that company founders that can't sell their product will never be successful entrepreneurs. He talked about how founders need to know how and why customers make purchasing decisions, how to process information, and how customers think about the problems that you think you have.

He also suggested that lead engineers should spend 20% of their time in front of customers. Doesn't sound like much, but that's one day every week. Think about that.

The complete podcast is certainly an hour of time well-invested.


Friday, November 14, 2008

Perspectives: State of Venture Capital

This slideshare presentation developed by audits the state of the venture capital capital. It's a nice synopsis of a huge challenge - getting money to innovators. Whether venture capital industry is the answer doesn't matter. What matters is that we continue to develop innovation as a pipeline to new technology leaps and healthier long term economic growth.

Judy Estrin tackled this concept during her recent presentation as part of Stanford's Entrepreneurial Thought Leader Lecture - "Is Innovation Withering on the Vine." Whether you agree with the politics of the podcast or not, the principle remains the same - the innovation pipeline is slowing.

This supports some of the thoughts presented in a previous article - "Venture Capital: Moving Up the Ladder" - posted back in August. This isn't surprising to most in the industry.

Revelation is not the issue, resolution is...

(And a "Thank you!" goes to Mike Simonsen for pointing out both the presentation on and Judy's participation in the Stanford series. That's why he's the boss...)

Wednesday, November 12, 2008

Recent Commentary on Venture Capital Trends

From PWC's report "Exit slowdown and the new venture capital landscape":

"In the second quarter of 2008 there were zero VC-backed exits - on the heels of five in the previous quarter which raised a thin $283 million. In the first half of 2007, by comparison, 43 VC-backed IPOs collected $6.3 billion."
From the Q3, 2008 report of University of San Francisco Silicon Valley Venture Capitalist Confidence Index™:
The Silicon Valley Venture Capitalist Confidence Index reading "fell from the previous quarter’s reading of 3.07 to a fourth consecutive new low since the Index was originated in Q1 2004 and indicates a continuing downtrend in venture capitalists’ confidence."
From Lawrence Aragon's article on this week:
"The preliminary numbers indicate that VCs are hunkering down more quickly than they did after the dot-com crash. The data show that U.S.-based venture firms invested in just 250 companies last month, down from 565 companies in September and 518 companies in October 2007. You have to go all the way back to January 2004 (when they invested in 232 companies) to find a lower number. The only other October with fewer deals was in 1993."
Some positive does exist out there. The Q3 2008 MoneyTree Report published by PriceWaterhouseCooper indicates that overall venture capital activity is stable if measured in terms of dollars.
"Despite the turmoil in the global financial markets, US venture capital investing remained within historical norms in the third quarter of 2008. Venture capitalists invested $7.1 billion in 907 deals..."


Friday, November 7, 2008

2nd Annual MIT Elevator Pitch contest

Just picked up this link from Guy Kawasaki on Twitter. Good stuff if you have a few minutes...

MIT hosted their 2nd Annual Elevator Pitch contest on October 18. Here's the video of the event.