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Your statement is not accurate in business terms. The valuation for an acquisition is not directly related to the revenue generated by the company/product acqui

by fosk 11y ago

Your statement is not accurate in business terms. The valuation for an acquisition is not directly related to the revenue generated by the company/product acquired, but also by market conditions, cost of building it in-house, time-to-market cost of building it as opposed to having right now (this also gives a strategical advantage with competitors), and the quality of the team who will now join SnapChat, among other factors (like, but not limited to, multiple acquisition offers at the same time from different companies which in turn triggers an auction, thus a higher price). Edit: Plus the company has probably been acquired with an almost all-stock deal, which given the current valuation of SnapChat at 16B (imho inflated at this current point in time, but with potential to grow in the future), makes it very cheap too.

forgetsusername 11y ago
>but also by market conditions, cost of building it in-house, time-to-market cost of building it as opposed to having right now (this also gives a strategical advantage with competitors), and the quality of the team who will now join SnapChat, among other factors Which all only matter insofar as their ability to produce revenue. It's odd how this is overlooked in the SV community. Who cares if it's a "deal" because it would cost $101 million to "produce in house" if it will produce no revenue? I'm making no judgement on this deal, but this idea in general. >multiple acquisition offers at the same time from different companies which in turn triggers an auction You bid what you think it's worth, period. What others think it's worth is irrelevant. Do these businesses not have somebody in house doing these sorts of calculations? They show up to the auction with no plan?
- ec109685 11y ago
  You mean profit, right? If it costs them 500M to make 100M, that still wouldn't earn back what they paid (obviously as the parent said, there is more to the deal than just future revenue/profit produced).

by fosk 11y ago

forgetsusername 11y ago

>but also by market conditions, cost of building it in-house, time-to-market cost of building it as opposed to having right now (this also gives a strategical advantage with competitors), and the quality of the team who will now join SnapChat, among other factors Which all only matter insofar as their ability to produce revenue. It's odd how this is overlooked in the SV community. Who cares if it's a "deal" because it would cost $101 million to "produce in house" if it will produce no revenue? I'm making no judgement on this deal, but this idea in general. >multiple acquisition offers at the same time from different companies which in turn triggers an auction You bid what you think it's worth, period. What others think it's worth is irrelevant. Do these businesses not have somebody in house doing these sorts of calculations? They show up to the auction with no plan?

ec109685 11y ago
You mean profit, right? If it costs them 500M to make 100M, that still wouldn't earn back what they paid (obviously as the parent said, there is more to the deal than just future revenue/profit produced).