Zuckerberg's Big Facebook Mistake(forbes.com)
forbes.com
Zuckerberg's Big Facebook Mistake
http://www.forbes.com/sites/nathanvardi/2012/07/27/mark-zuckerbergs-big-facebook-mistake/
12 comments
The mistake, if it turns out to be one, was not in shunning capital markets, but rather, building a business that required capital on a scale that only the capital market could provide.
an IPO is an IPO - aside from all the hyperventilating over share price over these first few weeks, Zuck and Co now have raised the capital they need. Let's see how things are in one year. Facebook's long term prospects will be built on the quality of their products, not the jitters of the short term investor.
totally agree with you. One major point of that article was that, had Facebook IPO'd sooner, it would have been better off with the discipline that comes with being a public company. Baloney. I can think of a ton of companies that have manipulated their way under the watchful gaze of Wall Street. this follow up post makes some great counter points:
http://www.forbes.com/sites/tomiogeron/2012/07/27/post-ipo-f...
http://www.forbes.com/sites/tomiogeron/2012/07/27/post-ipo-f...
I stopped reading here: "The roadblocks he faced in building the world’s biggest social-networking company were tiny, like an overdramatized civil lawsuit" and also wished for a "downvote" button. This trivializes what it takes to build a multi-billion-dollar company—any multi-billion-dollar company.
When it came to monetizing search, Google was lucky in that someone else already figured out how to do that (GoTo.com). No comparably effective model exists for monetizing high traffic websites (social media or otherwise), despite many attempts over the past two decades. Not even close.
If Zuck took Facebook public 5 years ago, they would have gotten much less money, and they would have been distracted by investors calling for them to focus on building out that business model rather than attracting users - and Zuck may have lost controlling power in the company (less money + less users = less leverage for Zuck).
If Zuck took Facebook public 5 years ago, they would have gotten much less money, and they would have been distracted by investors calling for them to focus on building out that business model rather than attracting users - and Zuck may have lost controlling power in the company (less money + less users = less leverage for Zuck).
>If Zuck took Facebook public 5 years ago, they would have gotten much less money, and they would have been distracted by investors calling for them to focus on building out that business model rather than attracting users - and Zuck may have lost controlling power in the company (less money + less users = less leverage for Zuck).
Would this be a bad thing? The entire reason that Facebook needed to go public was because they needed the money to pay off their investors.
Would this be a bad thing? The entire reason that Facebook needed to go public was because they needed the money to pay off their investors.
So who's gonna pay off the public shareholders of FB now? Where's the greater fool?
Well...Facebook's IPO valuation was about 100 billion US dollars. So if Facebook generates 100 billion dollars in profits throughout its history, inflation-adjusted, IPO investors who hold onto their shares will get their money back. Otherwise, their gamble will not have paid off. There won't necessarily have to be any fools anywhere.
I'm not so sure about that. Facebook is WAY overpriced. It will take years to recoup the costs and they have very few prospects of making money in the forseeable future.
I support your theory that Facebook will make 100bn back, but by the time Facebook does, the 100bn will be worth far less than that amount, due to potential earnings.
As an example, I bought Qantas shares a while ago - and held them for 10 years. Their value didn't go up much in 10 years, so the "potential" earnings of that money was not realised - so despite the shares not going backwards, I lost out.
Facebook is a losing proposition, unless they pull a rabbit out of the hat - and there's nothing on the horizon at all that even indicates they will come up with something.
As an example, I bought Qantas shares a while ago - and held them for 10 years. Their value didn't go up much in 10 years, so the "potential" earnings of that money was not realised - so despite the shares not going backwards, I lost out.
Facebook is a losing proposition, unless they pull a rabbit out of the hat - and there's nothing on the horizon at all that even indicates they will come up with something.
That's not why FB went public. They went because they had to...
Going public wasn't required by their investor count, but they would have had to have audited financials, so the benefits of remaining private would have been reduced anyway:
http://www.quora.com/Why-does-Facebook-need-to-go-public
http://www.quora.com/Why-does-Facebook-need-to-go-public
There's a little hyperbole and overly simplified statements in here but this article really hit the nail on the head. Zuckerberg missed the most explosive part of his curve to go out by waiting so long. He took onboard investors who did not push the company - they knew they were good for a great exit no matter what. Now he's going to end up with low morale and scrambling to mature the platform.
He danced with the Devil and right now the Devil is up on points going into the 7th round.......
He danced with the Devil and right now the Devil is up on points going into the 7th round.......
You can have the greatest product in the world, if you don't make money from it the company is worth zilch! stepping out of SV shows these companies what the real world is. You can take that to the bank.
Sure, Facebook had a billion dollars in revenue last quarter.
Only half of it was profit though: http://www.gmanetwork.com/news/story/267151/economy/finance/...
Mistake?
For Facebook investors perhaps. But not for Zuckerberg. He gamed the IPO system like a champ, extracting far more hard cash from investors and financial institutions than he should have been able to based on the fundamentals of his company.
Consider. Here's this company that is nominally a "publicly traded corporation" that still has over 50% of the stock in one person's hands, Zuck. And it's sitting on a pile of many billions of dollars of cold hard cash (representing well over a decade of potential accumulated profits at present levels). All of the early investors and employees have cashed out to the tune of millions or even billions per person. Meanwhile, Facebook is using its corporate cash hoard to buy up competitors and fill out the empire.
They played this game remarkably. They played the banks, they played the financial analysts, they played the investors. They've got theirs and they are far more secure of a company than they were before the IPO.
For Facebook investors perhaps. But not for Zuckerberg. He gamed the IPO system like a champ, extracting far more hard cash from investors and financial institutions than he should have been able to based on the fundamentals of his company.
Consider. Here's this company that is nominally a "publicly traded corporation" that still has over 50% of the stock in one person's hands, Zuck. And it's sitting on a pile of many billions of dollars of cold hard cash (representing well over a decade of potential accumulated profits at present levels). All of the early investors and employees have cashed out to the tune of millions or even billions per person. Meanwhile, Facebook is using its corporate cash hoard to buy up competitors and fill out the empire.
They played this game remarkably. They played the banks, they played the financial analysts, they played the investors. They've got theirs and they are far more secure of a company than they were before the IPO.
Facebook is making money and has a giant warchest from the IPO.
The main risk of being public is to employee morale, but the right internal culture/messaging, and (occasionally) option-repricing/reissuing can manage that.
The main risk of being public is to employee morale, but the right internal culture/messaging, and (occasionally) option-repricing/reissuing can manage that.
Most FB employees have RSUs, not options.
Where was the content here? What was the point of this article? It's a bunch of cobbled together nonsense with no logical flow.
Pardon someone grumpy to be up early on a Saturday, but please don't post things that make no damn sense.
Pardon someone grumpy to be up early on a Saturday, but please don't post things that make no damn sense.
It my be just me, but did anyone else sense a lot of Wall Street/banker/etc. "Heh, look at those adorable little web people, trying to do something?"
To wit: Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.
Honestly? Isn't that a bit self-congratulatory? How about places like Barclays--can they evade the discipline?
To wit: Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.
Honestly? Isn't that a bit self-congratulatory? How about places like Barclays--can they evade the discipline?
The roadblocks he faced in building the world’s biggest
social-networking company were tiny
I don't know why you are surprised. Forbes is not a reputable publication. It's "People Magazine / US Weekly" for people in the business world. It's not Bloomberg News.
http://www.hnsearch.com/search#request/submissions&q=for...
http://www.hnsearch.com/search#request/submissions&q=for...
"[Facebook] still needed money", is just so wrong. The IPO was about Zuckerberg and close colleageaus being able to cash out a little bit and overcoming the shareholder limit.
I highly doubt it has any impact on his plans for facebook. A pretty poor assesment by a publication like "Forbes"