βIn the Studio,β CRVβs George Zachary Discusses Bubbles on the Eve of Facebookβs IPO
Semil Shah stashed this in Venture Capital
This 15-min video is one of the best discussions about the Valley's current economic climate I've seen. I'm curious to get a range of reactions on this -- thoughts? I know it's long, but I really do think it's well worth the time. George is an expert on this subject.
That was really insightful.
What specifically did you learn? I'm about to watch it...
i guess the bubble is coming in 2013 :)
Don't be sure. Things are rarely as predictable as we think.
1. Why did he invest in the "second tier" (Twitter) instead of what he calls the "leader" (Facebook)?
2. Comparing Facebook IPO to Netscape IPO really downplays how huge Facebook is. Netscape was worth a few billion when it went public. Facebook is one of the 50 most valuable companies in the world. BIG difference.
3. He spends a lot of time saying that if you have exponential growth you'll be able to find an investor. Everyone else, good luck to you. Am I misunderstanding that?
1. There may be many reasons why people invested in Twitter, as anything would be in another tier if not FB, and by the time the Series B rolled around, probably too difficult to get into for anyone.
2. He said there were things that reminded him of Netscape (in terms of Valley atmosphere) and things that were different. I would re-watch the video, he was pretty clear about that.
3. He's saying that, for now to rest of 2012, it's easy to get seed funded, but the real competition among investors is to find products and services that show "growth on growth" dynamics, exponential growth. I think that's obvious in a way, but to me he's trying to highlight those as the competitive deals. For the others, he's saying the deal terms won't be great ($5m-ish) or they won't get funded at all, which is consistent with what I've seen, at least anecdotally.
The cynic in me caught George wishing "Over the next couple of years Twitter will have a billion users".
Okay, so maybe I snickered too soon... According to Mediabistro Twitter is on track for 500M users in 2012, and 140M actives.
500 million ACCOUNTS. I'm one user but 8 accounts.
And to Semil's points:
1. Difficulty is a frame of mind. Investing in Facebook's B round took guts. Because they were the leader at the time, they sought a very high valuation.
2. Netscape IPO was 1995 and Hotmail acquisition was 1998. By contrast, Instagram acquisition was April and Facebook IPO is May. Analogies are not always helpful because circumstances differ. How come this time around phase 2 came before phase 1?
3. It is NOT easy to get seed funded in 2012. Many startups struggle.
Perhaps George is saying that Facebook isn't really the leader as the landscape shifts rapidly to mobile.
That's quite profound.
Emily Chang of Bloomberg has an interview with George in which he says:
Twitter is monetizing mobile better than Facebook.
Perhaps this is why Facebook is working so hard on Sponsored Mobile Stories.
In any case, George says he'd buy Facebook at 15-25 dollars a share.
3 years later:
1. Facebook has over 1.4 billion monthly users.
2. Twitter at 300 million monthly users is nowhere near 1 billion.
3. Anyone who bought Facebook at 15-25 dollars a share is happy.
4. Facebook is monetizing mobile better than Twitter.