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a) Facebook is a definitely the odd man out. They made something happen that very, very few other eyeball companies have managed. b) Facebook isn't winning shi

by dhh 17y ago

a) Facebook is a definitely the odd man out. They made something happen that very, very few other eyeball companies have managed. b) Facebook isn't winning shit for their investors YET. They've allegedly just turned cash flow positive, but they're still $750MM in the hole from VC infusions over the past SIX YEARS. Add interest and risk premium and Facebook has to make a TRUCK load of money to pay back their investors. Not just break even. c) Fashions change. Remember when Myspace was the golden goose? Friendster? It is far from a guarantee that Facebook will remain hot shit for long enough to pay back $750MM with interest and premium.

rortian 17y ago
Poor VCs not getting quick cash from their investments. They truly are victims for getting a stake in a hugely successful company. VCs are not private equity. I'm sure they didn't mind quick cashouts during the late 90s, but expecting to get major money from an up and comer in a short timespan is delusional. Equity is not debt. By your dichotomy MySpace is simply amazing for paying investors (interest?) and facebook is a drain on the preciously scarce resources of wealthy individuals and institutions.
- dhh 17y ago
  What metric are you using to define success? It seems not to be the traditional capitalist one. The score card for Facebook currently says minus $750M. Breaking even or a small profit is not going to change that. Facebook totally COULD be a successful, but they'll need to get some serious PROFITS (not revenues!) going to make that happen. Certainly within the realm of possibilities, but it hasn't happened yet.
  - rortian 17y ago
    Where did this $750M come from? Traditional capitalists. What rubes right? I have a hard time with someone trying to assert facebook isn't a success. However, if you think success is 'profitable in 2010' then far out they are a failure. This obsession with equity as debt is very strange to me. By this metric Apple is a hugely indebted company. When you break down a company you look at assets and liabilities. Facebook has few liabilities in the form of debt because so many wealth individuals and institutions think having a stake in its future is a desirable proposition. I would call most of their assets the intangible ones of being of the most visited, used, and widely-known websites in the world. If you think this is worthless, okay. But I think its a little bizarre to assert they are $750M in the hole.
    - startuprules 17y ago
      Ning is also a site that is 'visited', 'used', 'widely-known' and 'had stake in future'.
    - lsc 17y ago
      price to earnings for AAPL is around 30, which means that if you bought all of apple, and it continued to make just as much money, it would take 30 years to earn your investment back. Equity is different from debit, yes, but when you talk about how much money you are making, it really only makes sense to talk about how much money you are making based on how much money was invested. If you have 1mil invested, and you are making 1 mil a year, that's pretty goddamn impressive. If you have 750 million invested, and you are making 1 million a year profit, well, gee, I could do better than that buying bonds. Now, Both AAPL and facebook have the P/E ratios they have because people expect them to make more money in the future than they are making now. For instance, if I was to sell my company (and I've had a few offers) it looks like I'd get about a year worth of revenue. This is pretty typical when buying ISPs, because nobody expects exponential growth to go on for any period of time. Just sayin; It is a reasonable and well-established idea to look at how much equity is invested when looking at a company's profit margins. It's also reasonable and well-established to look forward at how much profit the company is expected to make in the future, too, which is why facebook is valued as it is by some people. (there is, however, a great degree of uncertainty in projecting what profits a company may make in the future, which is why there is a great deal more controversy over the value of twitter than over the value of AAPL. Personally, if there was a convenient way to buy a long-term 'put' on twitter, I'd do it. Just my opinion,)
      - rortian 17y ago
        I hope you realize how simplistic you are being. Does Apple give its shareholders all of its profits? Hardly. It is interesting to theorize what a stock price for a firm that cannot be purchased by another firm (at least extraordinarily unlikely to be purchased) and that doesn't pay dividends means. People about all sorts of measures of return. However, very few talk about equity being debt.
frederickcook 17y ago
Investors aren't buying stock in Facebook or pretty much any software startup (save yours) because they expect to someday get paid by the company. To make money off that kind of investment, they need liquidity. They all expect to see another financing round at a higher valuation, and with the size of Facebook these days, it'll probably have to be an IPO. Regarding "Fashions change," I agree that that's the risky part, and from the amount of Farmville bullshit I see on my wall these days, it's a significant risk.
- apphacker 17y ago
  Sounds like a pyramid scheme where earlier investors continue to dupe later investors. Eventually it's my 401k that loses out when all of this blows up when you run out of investors. I hate the stockmarket. If you want to make money, sell a service or make a widget.
  - frederickcook 17y ago
    >>Sounds like a pyramid scheme where earlier investors continue to dupe later investors. Funny way to put it, but it kind of is, except that it isn't previous investors duping new investors, it's just an investor mentality. People are still buying into Facebook at a $15B valuation with no real precedent for a company like them being worth that much. It will be really interesting 5-10 years from now after they've IPO'd/been-acquired/fallen-out-of-favor where their revenue and market cap really settle.
johnrob 17y ago
I think Ning is trying to maximize the size of success, not the likelihood. Trying something very, very few other companies have managed is precisely the point. Most of us would rather increase the likelihood; but most of us are also not Marc Andreessen. It's important to recognize this. There's nothing wrong with rolling the dice and going big, if that's what you want. [EDIT] It's foolish, however, if you think playing that way will increase the likelihood of success.
- apsurd 17y ago
  I think your point is the most widely used justification for GOING BIG. But even big companies need sustainability. Clearly 37signals has their own unique message but if there's one thing I get from it, it's that businesses should be built to last. Whether you are trying to make space-travel affordable or running your own Italian restaurant, your venture needs to last. So the question is not necessarily one of magnitude, it's that internet companies looking for eyeballs tend to be running on faulty logic counter-intuitive to lasting - forget about making money, or changing the world ; you can't do that if you aren't here tomorrow.
mark_l_watson 17y ago
Agreed, Facebook is odd, no other way to say it. For developers, Facebook Connect is sort-of interesting but using Facebook is boring and I have never clicked on any FB advertisements (compare to, for example, GMail advertisements that I do hit and sometimes I buy stuff: profit for Google). Off topic: I am half way through your new book "REWORK" and and I find it useful since it addresses so many of my own bad habits. Unfortunately, I need to constantly fight the temptation to explore new tech instead of getting things done.

by dhh 17y ago

rortian 17y ago

Poor VCs not getting quick cash from their investments. They truly are victims for getting a stake in a hugely successful company. VCs are not private equity. I'm sure they didn't mind quick cashouts during the late 90s, but expecting to get major money from an up and comer in a short timespan is delusional. Equity is not debt. By your dichotomy MySpace is simply amazing for paying investors (interest?) and facebook is a drain on the preciously scarce resources of wealthy individuals and institutions.

dhh 17y ago
What metric are you using to define success? It seems not to be the traditional capitalist one. The score card for Facebook currently says minus $750M. Breaking even or a small profit is not going to change that. Facebook totally COULD be a successful, but they'll need to get some serious PROFITS (not revenues!) going to make that happen. Certainly within the realm of possibilities, but it hasn't happened yet.
- rortian 17y ago
  Where did this $750M come from? Traditional capitalists. What rubes right? I have a hard time with someone trying to assert facebook isn't a success. However, if you think success is 'profitable in 2010' then far out they are a failure. This obsession with equity as debt is very strange to me. By this metric Apple is a hugely indebted company. When you break down a company you look at assets and liabilities. Facebook has few liabilities in the form of debt because so many wealth individuals and institutions think having a stake in its future is a desirable proposition. I would call most of their assets the intangible ones of being of the most visited, used, and widely-known websites in the world. If you think this is worthless, okay. But I think its a little bizarre to assert they are $750M in the hole.
  - startuprules 17y ago
    Ning is also a site that is 'visited', 'used', 'widely-known' and 'had stake in future'.
  - lsc 17y ago
    price to earnings for AAPL is around 30, which means that if you bought all of apple, and it continued to make just as much money, it would take 30 years to earn your investment back. Equity is different from debit, yes, but when you talk about how much money you are making, it really only makes sense to talk about how much money you are making based on how much money was invested. If you have 1mil invested, and you are making 1 mil a year, that's pretty goddamn impressive. If you have 750 million invested, and you are making 1 million a year profit, well, gee, I could do better than that buying bonds. Now, Both AAPL and facebook have the P/E ratios they have because people expect them to make more money in the future than they are making now. For instance, if I was to sell my company (and I've had a few offers) it looks like I'd get about a year worth of revenue. This is pretty typical when buying ISPs, because nobody expects exponential growth to go on for any period of time. Just sayin; It is a reasonable and well-established idea to look at how much equity is invested when looking at a company's profit margins. It's also reasonable and well-established to look forward at how much profit the company is expected to make in the future, too, which is why facebook is valued as it is by some people. (there is, however, a great degree of uncertainty in projecting what profits a company may make in the future, which is why there is a great deal more controversy over the value of twitter than over the value of AAPL. Personally, if there was a convenient way to buy a long-term 'put' on twitter, I'd do it. Just my opinion,)
    - rortian 17y ago
      I hope you realize how simplistic you are being. Does Apple give its shareholders all of its profits? Hardly. It is interesting to theorize what a stock price for a firm that cannot be purchased by another firm (at least extraordinarily unlikely to be purchased) and that doesn't pay dividends means. People about all sorts of measures of return. However, very few talk about equity being debt.

frederickcook 17y ago

Investors aren't buying stock in Facebook or pretty much any software startup (save yours) because they expect to someday get paid by the company. To make money off that kind of investment, they need liquidity. They all expect to see another financing round at a higher valuation, and with the size of Facebook these days, it'll probably have to be an IPO. Regarding "Fashions change," I agree that that's the risky part, and from the amount of Farmville bullshit I see on my wall these days, it's a significant risk.

apphacker 17y ago
Sounds like a pyramid scheme where earlier investors continue to dupe later investors. Eventually it's my 401k that loses out when all of this blows up when you run out of investors. I hate the stockmarket. If you want to make money, sell a service or make a widget.
- frederickcook 17y ago
  >>Sounds like a pyramid scheme where earlier investors continue to dupe later investors. Funny way to put it, but it kind of is, except that it isn't previous investors duping new investors, it's just an investor mentality. People are still buying into Facebook at a $15B valuation with no real precedent for a company like them being worth that much. It will be really interesting 5-10 years from now after they've IPO'd/been-acquired/fallen-out-of-favor where their revenue and market cap really settle.

johnrob 17y ago

I think Ning is trying to maximize the size of success, not the likelihood. Trying something very, very few other companies have managed is precisely the point. Most of us would rather increase the likelihood; but most of us are also not Marc Andreessen. It's important to recognize this. There's nothing wrong with rolling the dice and going big, if that's what you want. [EDIT] It's foolish, however, if you think playing that way will increase the likelihood of success.

apsurd 17y ago
I think your point is the most widely used justification for GOING BIG. But even big companies need sustainability. Clearly 37signals has their own unique message but if there's one thing I get from it, it's that businesses should be built to last. Whether you are trying to make space-travel affordable or running your own Italian restaurant, your venture needs to last. So the question is not necessarily one of magnitude, it's that internet companies looking for eyeballs tend to be running on faulty logic counter-intuitive to lasting - forget about making money, or changing the world ; you can't do that if you aren't here tomorrow.

mark_l_watson 17y ago

Agreed, Facebook is odd, no other way to say it. For developers, Facebook Connect is sort-of interesting but using Facebook is boring and I have never clicked on any FB advertisements (compare to, for example, GMail advertisements that I do hit and sometimes I buy stuff: profit for Google). Off topic: I am half way through your new book "REWORK" and and I find it useful since it addresses so many of my own bad habits. Unfortunately, I need to constantly fight the temptation to explore new tech instead of getting things done.