Hey there and welcome back to our regular morning look at private companies, public markets and the gray area in between.
There’s a popular old post walking around Twitter today by entrepreneur and developer David Heinemeier Hansson (@DHH). DHH is a critic of specific components of the start-up world, specifically wild assessments. This entry from him is, in my view, a classic of the category.
The post in concern is titled “ Facebook is not worth$33,000,000,000,” and was written back in 2010.
You can already imagine who may find the post irksome– namely folks who are in the business of putting capital into high-growth business. This sort of snark, though not precisely current, is a fine example of how posts like the Facebook entry are read on Twitter.
If you take a minute to in fact read DHH’s blog, nevertheless, you’ll discover that the first part of his argument is that offering a minute slice of a company at a high price, thus “revaluing” the business at a new, stratospheric evaluation, is a little silly. DHH didn’t like that by selling a few percentage points of itself, Facebook’s worth was pegged at $ 33 billion. We have actually seen some similarly-small-dollar, high-valuation rounds just recently that might be scooted into the exact same pail.
It’s a somewhat fair point.
What struck me this early morning while re-reading the DHH piece was that his 2nd two points are useful rubrics for framing the modern, post-unicorn era. DHH composed that profits matter, business are ultimately valued on them, and that business that don’t scale financial outcomes as they add clients (or users) aren’t terrific.
Article curated by RJ Shara from Source. RJ Shara is a Bay Area Radio Host (Radio Jockey) who talks about the startup ecosystem – entrepreneurs, investments, policies and more on her show The Silicon Dreams. The show streams on Radio Zindagi 1170AM on Mondays from 3.30 PM to 4 PM.