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> Since launching in 2009, Pinterest has raised $764M dollars; once this round closes (whether or not they raise the full $578M), they’ll have surpassed the bil

> Since launching in 2009, Pinterest has raised $764M dollars; once this round closes (whether or not they raise the full $578M), they’ll have surpassed the billion dollar mark. For the sake of this comment let's assume that Pinterest has never had any income at all... can someone please explain what they have spent, or plan on spending, over $1B on? If there isn't a plan to spend this money, what other motivations could they have for raising so much money and why are investors still pouring it in?

jamiequint 12y ago
500+ employees.
- CPLX 12y ago
  Then they are in excess of $2,000,000 per. That don't seem like the reason.
- lostsock 12y ago
  500 employees * lets say $150,000 per employee * 6 years is only $450,000,000. That leaves ~$150m from previous rounds to spend on infrastructure etc before they need to raise more in the latest round.
  - mwcremer 12y ago
    Conventional wisdom is that an employee costs the company twice their salary (insurance, facilities, etc.) So it's closer to $1 billion.
    - lostsock 12y ago
      I expect that they would be paying each of their 500 employees less than $150,000 yearly salary so had inflated that price to include the other expenses involved in hiring someone. Perhaps it is a little on the low side but if you also factor in that Pinterest wouldn't have been employing 500 people since 2009 I'd hazard a guess $450m is on the high side, not the low, of their actual employee expenses.
adventured 12y ago
If the stock market melts down - which it's prone to do once or twice per decade - the ability for Pinterest to IPO and take advantage of favorable market conditions will close, perhaps for years. Simply put, raising money in this environment is extraordinarily favorable, a company may only get this window once every seven to ten years. The Fed has yet to raise interest rates, but may choose to this year. The end of QE has already removed some liquidity from the markets and set the dollar on a massive run which will put pressure on almost anything priced in dollars. If the Fed raises interest rates, it will sap at least some liquidity from the venture funding market (which is red hot right now). If Pinterest can't IPO for five years because the stock market crashes in nine months and the economy turns south (almost six years since the last recession already), then ideally they'll want a cash war chest to keep up with the other giants they compete with (directly or indirectly) that are already public or are well funded. Saying it's prudent for Pinterest to have a billion+ in cash is probably understating things.
- logicallee 12y ago
  this is a good point. if they didn't raise money now, they might have to resort to revenue.
  - adventured 12y ago
    I saw this type of statement a lot by Facebook doubters (it could never make money, it would never have real sales, it had no business model, etc). Let me check Facebook's last fiscal year. $12.4 billion sales; $2.9 billion profit Could Pinterest reach $5 billion in sales and $1 billion in net income based on what they're capable of in the next five or six years when it comes to traffic and the obvious monetization? Yes, and it would make the present valuation dirt cheap. Twitter just turned on their revenue machine two years ago, and they're already at $500m a quarter. They too supposedly had questionable business potential.
balls187 12y ago
The prevailing wisdom I was told, if you can raise money on favorable terms, do so. In any business, and "startups" in general cash is king. The money could be used to fuel acquisitions, pay early investors, or a number of things.

jamiequint 12y ago

500+ employees.

CPLX 12y ago
Then they are in excess of $2,000,000 per. That don't seem like the reason.
lostsock 12y ago
500 employees * lets say $150,000 per employee * 6 years is only $450,000,000. That leaves ~$150m from previous rounds to spend on infrastructure etc before they need to raise more in the latest round.
- mwcremer 12y ago
  Conventional wisdom is that an employee costs the company twice their salary (insurance, facilities, etc.) So it's closer to $1 billion.
  - lostsock 12y ago
    I expect that they would be paying each of their 500 employees less than $150,000 yearly salary so had inflated that price to include the other expenses involved in hiring someone. Perhaps it is a little on the low side but if you also factor in that Pinterest wouldn't have been employing 500 people since 2009 I'd hazard a guess $450m is on the high side, not the low, of their actual employee expenses.

adventured 12y ago

If the stock market melts down - which it's prone to do once or twice per decade - the ability for Pinterest to IPO and take advantage of favorable market conditions will close, perhaps for years. Simply put, raising money in this environment is extraordinarily favorable, a company may only get this window once every seven to ten years. The Fed has yet to raise interest rates, but may choose to this year. The end of QE has already removed some liquidity from the markets and set the dollar on a massive run which will put pressure on almost anything priced in dollars. If the Fed raises interest rates, it will sap at least some liquidity from the venture funding market (which is red hot right now). If Pinterest can't IPO for five years because the stock market crashes in nine months and the economy turns south (almost six years since the last recession already), then ideally they'll want a cash war chest to keep up with the other giants they compete with (directly or indirectly) that are already public or are well funded. Saying it's prudent for Pinterest to have a billion+ in cash is probably understating things.

logicallee 12y ago
this is a good point. if they didn't raise money now, they might have to resort to revenue.
- adventured 12y ago
  I saw this type of statement a lot by Facebook doubters (it could never make money, it would never have real sales, it had no business model, etc). Let me check Facebook's last fiscal year. $12.4 billion sales; $2.9 billion profit Could Pinterest reach $5 billion in sales and $1 billion in net income based on what they're capable of in the next five or six years when it comes to traffic and the obvious monetization? Yes, and it would make the present valuation dirt cheap. Twitter just turned on their revenue machine two years ago, and they're already at $500m a quarter. They too supposedly had questionable business potential.

balls187 12y ago

The prevailing wisdom I was told, if you can raise money on favorable terms, do so. In any business, and "startups" in general cash is king. The money could be used to fuel acquisitions, pay early investors, or a number of things.