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Just more linkbait from 37signals. This article is being really pedantic by only focusing on the last transaction. Facebook sales on SecondMarket have been hov

Just more linkbait from 37signals. This article is being really pedantic by only focusing on the last transaction. Facebook sales on SecondMarket have been hovering around the $70BN range since 6 months ago (1) so there is clearly enough interest in a private market auction to place it there. Calling this "Grossly Irresponsible" is laughable. Facebook's stated revenue and earnings are ahead of Google's pre-IPO numbers, probably enough to justify the 3x valuation (Google IPO'd at around $25BN IIRC) they will seek in their offering. 1. http://techcrunch.com/2011/01/27/facebook-shares-dip-7-in-most-recent-secondmarket-auction/ http://techcrunch.com/2011/01/27/facebook-shares-dip-7-in-mo...

AJ007 15y ago
Not to mention that this is the exact same math used to determine the market capitalizations of all companies. Linkbait gets you links, it also destroys your credibility. Which, by the way, is the reason I read hacker news and not any of the other numerous alternatives.
- dlss 15y ago
  Yeah I wonder how 37signals decided critiquing the finance press was in their circle of competence. What's next, a forbes article debating static and dynamic typing? :p
  - theklub 15y ago
    Makes me wonder who the real wizards of bullshit are.
    - deleted 15y ago
      [deleted]
- kmfrk 15y ago
  HN (front page) is still very susceptible to linkbait, though - Techcrunch are particularly good at "gaming" HN. I wonder if people on this site have always been so weary of 37signals, or if the company's reputation has just slowly eroded with all the meagre diatribes.
  - edw 15y ago
    The 37signals folks are interesting: as product designers and product managers, I have the utmost respect for them. As observers of the VC scene, their opinions and observations are often useless. That said, if you don't want to go the VC route and instead want to have a go at building a successful business without outside financing, I think Getting Real and Rework are must-reads. Genius is rarely universal. William Shockley invented the transistor — yes, a gross oversimplification — but was an advocate of eugenics. Henry Ford and Charles Lindbergh? Nazi sympathizers. No, I don't think Jason Fried, DHH, and co. are monsters, but these high-profile examples show that skill, talent, or insight in one area do not necessarily transfer to others. Not everyone is a Leonardo da Vinci.
    - deleted 15y ago
      [deleted]
      - edw 15y ago
        I'm not attacking 37signals; I'm offering a nuanced opinion. Notice that I highly recommend much of their work. As for the examples I chose, I suppose it would have been better to choose blander ones, but no bland examples popped into my head as I wrote — nor have any occurred to me in the hour since I originally wrote my comment. There must be some example of a baseball player who had great hitting ability yet insisted on trying to steal bases despite being universally acknowledged as a horrible base stealer. But I don't know who he is. Shockley, Ford, and Lindbergh possess precisely the sorts of nerd, capitalist, and ballsy qualities that we as HN readers often admire. They serve as disquieting reminders that people like us can be guilty of terrible lapses in judgement, perhaps because of the success they experienced doing the things we (reservedly) admire them for. P.S. You completely changed the content of your comment over a half hour after originally posting it. Is that considered a faux pas or is it a completely legit thing to do?
    - codeup 15y ago
      You could have found other examples than supporters of eugenics and nazi sympathizers to argue that "genius is rarely universal". Instead you make hair-raising comparisons and close by writing: "I don't think Jason Fried, DHH, and co. are monsters, but". This is a low form of an ad-hominem attack.
- deleted 15y ago
  [deleted]
codeup 15y ago
This is not linkbait. This post by 37signals is criticizing the way market capitalization is often determined. Facebook's current valuation is just an extreme example. Your choice to ignore the argument doesn't mean there is none.
- bluedanieru 15y ago
  How else should we determine market capitalization then? If that were in the article it would have been worth a read.
  - meow 15y ago
    AFAIK, market capitalization has not much meaning for pre-ipo stock. Problem is that, IPO price isn't just the last price at which the stock was bought in secondary market. Also, there is no indication if what kind of stock was sold. If it is not common stock, then this definitely wont be indicative of the actual valuation.
    - jamiequint 15y ago
      There is no way this sale, or any of the recent ones were not common stock.
- edw 15y ago
  The most recent investors would not have bought the stock if they had assumed that their investment would be worth less in the future, therefore, yes, they are valuing the company at $80bil or whatever the number is. This is unlike the "37signals is worth $1bil" link-bait stunt in that people expect to make money on their Facebook investment. Of course, GSV is simply betting that Facebook will be valued by the public markets for more than $80bil at some point in the future, not necessarily for any extended period. They might very well be hoping to make money off Facebook in a greater-fool-theory play.
  - joshuacc 15y ago
    "The most recent investors would not have bought the stock if they had assumed that their investment would be worth less in the future," This is true. "therefore, yes, they are valuing the company at $80bil or whatever the number is." But this does not follow. They are valuing their investment at the price they paid. They aren't (necessarily) valuing the rest of the company at all. For instance, they could believe that Facebook's total value will crash to nothing in the next couple of years, but that (due to demand for Facebook stock) they will be able to make a 500% profit by selling off their investment beforehand. That's an extreme example, but illustrates a problem with extrapolating a company's value from the sale of a small percentage. I'm sure others have studied this, but intuitively something like a rolling average seems to make more sense for that sort of extrapolation.

AJ007 15y ago

Not to mention that this is the exact same math used to determine the market capitalizations of all companies. Linkbait gets you links, it also destroys your credibility. Which, by the way, is the reason I read hacker news and not any of the other numerous alternatives.

dlss 15y ago
Yeah I wonder how 37signals decided critiquing the finance press was in their circle of competence. What's next, a forbes article debating static and dynamic typing? :p
- theklub 15y ago
  Makes me wonder who the real wizards of bullshit are.
  - deleted 15y ago
    [deleted]
kmfrk 15y ago
HN (front page) is still very susceptible to linkbait, though - Techcrunch are particularly good at "gaming" HN. I wonder if people on this site have always been so weary of 37signals, or if the company's reputation has just slowly eroded with all the meagre diatribes.
- edw 15y ago
  The 37signals folks are interesting: as product designers and product managers, I have the utmost respect for them. As observers of the VC scene, their opinions and observations are often useless. That said, if you don't want to go the VC route and instead want to have a go at building a successful business without outside financing, I think Getting Real and Rework are must-reads. Genius is rarely universal. William Shockley invented the transistor — yes, a gross oversimplification — but was an advocate of eugenics. Henry Ford and Charles Lindbergh? Nazi sympathizers. No, I don't think Jason Fried, DHH, and co. are monsters, but these high-profile examples show that skill, talent, or insight in one area do not necessarily transfer to others. Not everyone is a Leonardo da Vinci.
  - deleted 15y ago
    [deleted]
    - edw 15y ago
      I'm not attacking 37signals; I'm offering a nuanced opinion. Notice that I highly recommend much of their work. As for the examples I chose, I suppose it would have been better to choose blander ones, but no bland examples popped into my head as I wrote — nor have any occurred to me in the hour since I originally wrote my comment. There must be some example of a baseball player who had great hitting ability yet insisted on trying to steal bases despite being universally acknowledged as a horrible base stealer. But I don't know who he is. Shockley, Ford, and Lindbergh possess precisely the sorts of nerd, capitalist, and ballsy qualities that we as HN readers often admire. They serve as disquieting reminders that people like us can be guilty of terrible lapses in judgement, perhaps because of the success they experienced doing the things we (reservedly) admire them for. P.S. You completely changed the content of your comment over a half hour after originally posting it. Is that considered a faux pas or is it a completely legit thing to do?
  - codeup 15y ago
    You could have found other examples than supporters of eugenics and nazi sympathizers to argue that "genius is rarely universal". Instead you make hair-raising comparisons and close by writing: "I don't think Jason Fried, DHH, and co. are monsters, but". This is a low form of an ad-hominem attack.
deleted 15y ago
[deleted]

codeup 15y ago

This is not linkbait. This post by 37signals is criticizing the way market capitalization is often determined. Facebook's current valuation is just an extreme example. Your choice to ignore the argument doesn't mean there is none.

bluedanieru 15y ago
How else should we determine market capitalization then? If that were in the article it would have been worth a read.
- meow 15y ago
  AFAIK, market capitalization has not much meaning for pre-ipo stock. Problem is that, IPO price isn't just the last price at which the stock was bought in secondary market. Also, there is no indication if what kind of stock was sold. If it is not common stock, then this definitely wont be indicative of the actual valuation.
  - jamiequint 15y ago
    There is no way this sale, or any of the recent ones were not common stock.
edw 15y ago
The most recent investors would not have bought the stock if they had assumed that their investment would be worth less in the future, therefore, yes, they are valuing the company at $80bil or whatever the number is. This is unlike the "37signals is worth $1bil" link-bait stunt in that people expect to make money on their Facebook investment. Of course, GSV is simply betting that Facebook will be valued by the public markets for more than $80bil at some point in the future, not necessarily for any extended period. They might very well be hoping to make money off Facebook in a greater-fool-theory play.
- joshuacc 15y ago
  "The most recent investors would not have bought the stock if they had assumed that their investment would be worth less in the future," This is true. "therefore, yes, they are valuing the company at $80bil or whatever the number is." But this does not follow. They are valuing their investment at the price they paid. They aren't (necessarily) valuing the rest of the company at all. For instance, they could believe that Facebook's total value will crash to nothing in the next couple of years, but that (due to demand for Facebook stock) they will be able to make a 500% profit by selling off their investment beforehand. That's an extreme example, but illustrates a problem with extrapolating a company's value from the sale of a small percentage. I'm sure others have studied this, but intuitively something like a rolling average seems to make more sense for that sort of extrapolation.