Twitter Is Overvalued

Nov 07, 2013

I love Twitter. I was an early adopter of the micro-blogging platform. As a matter of fact today marks my seventh anniversary using the service.

And today is a big day for Twitter. The company is set to go public on the New York Stock Exchange. And the IPO is creating quite the noise. Congratulations is always in order when you go from three guys sitting in a San Francisco park to an IPO.

As a long-time user of Twitter and a guy that co-founded two startups (Socialytics and Twitpay) based on the Twitter ecosystem I have a pretty good understanding of the company. I like it as a business. The way that the company is positioned to complement traditional media creates more staying power than Facebook. You can't watch a sports program without announcers throwing out their Twitter handles. With that said, like Facebook at the time if its IPO, Twitter is overvalued.

Last night Twitter priced its offering at $26 a share. That values the company at $14.4 billion. Twitter has $535 million in trailing 12 months revenue. The valuation is 26 times revenue.  Twitter is being valued in the same range as Facebook when they went public. And Facebook had net income. Twitter does not.

All the hype around the Twitter offering is going to make the shares fly like a little birdie in the short-term. Longer term I expect the stock to behave like the infamous Fail Whale. That will be the time to buy.

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Posted in Social, Stocks

Where You End

Aug 13, 2013

So after my somewhat gushing Groupon earnings call summary, here's the other side of the coin. One of the things that CEO Eric Lefkofsky said during the call, and it has become a major talking point since, is that Groupon wants to become the first place shoppers turn to when they "want to buy anything, anywhere, any time."

They have a long way to go. 

The first place I turn is Amazon. The second place is eBay. The third is a speciality store such as Apple, B&H, Nike, Tennis Express and the like. Groupon not so much. The fulfillment experience is lacking.

But this is perhaps more interesting. The place that I check last is Google. And what I do is search on the product name and the word coupon. My daughter told me to do so about three years ago when she was twelve. Seems that all the kids are doing it. An ingrained habit.

And more often than not I end up on RetailMeNot. Nearly every time I buy something on the Internet. Because of this behavior RetailMeNot is hot. They went public about a month ago (SALE) and the stock is up about 20% since then.

Where you end might be more important than where you start. And both of those behaviors seem a little cemented to me.

Disclosure: nCrowd, Inc. has an affiliate relationship with RetailMeNot, Inc.

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Posted in Deals, E-Commerce, Stocks

Groupon's Q2 Earnings Notes

Aug 09, 2013

On Wednesday Groupon (GRPN) announced their second quarter earnings. The stock market reacted quite favorably sending the stock up 22% in a single day. That is quite the dramatic recovery for a company with a pretty solid record of missteps with the financial community. This is why the stock is moving. 

Groupon's stock is now up 126% YTD and almost 400% since it's low last fall. The company's market capitalization now stands at over $7 billion putting all those "you should have taken the $6 billion from Google" stories to bed for a while.

I expect Groupon to continue to show strong results in the second half of the year. It also seems to me that might be setting up to jettison their EMEA business into which they expanded to quickly.

Groupon is the big battleship in the huge local ecommerce ocean. And a rising tide lifts all boats. What is good for Groupon is good for nCrowd.

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Posted in Deals, E-Commerce, nCrowd, Stocks

I Was Fired

Mar 03, 2013

Not me. Andrew Mason. The founder and CEO of Groupon. His letter to employees and the fact he publicly posted it because he knew it would leak are classic.

People of Groupon,

After four and a half intense and wonderful years as CEO of Groupon, I've decided that I'd like to spend more time with my family. Just kidding - I was fired today. If you're wondering why... you haven't been paying attention. From controversial metrics in our S1 to our material weakness to two quarters of missing our own expectations and a stock price that's hovering around one quarter of our listing price, the events of the last year and a half speak for themselves. As CEO, I am accountable.

You are doing amazing things at Groupon, and you deserve the outside world to give you a second chance. I'm getting in the way of that. A fresh CEO earns you that chance. The board is aligned behind the strategy we've shared over the last few months, and I've never seen you working together more effectively as a global company - it's time to give Groupon a relief valve from the public noise.

For those who are concerned about me, please don't be - I love Groupon, and I'm terribly proud of what we've created. I'm OK with having failed at this part of the journey. If Groupon was Battletoads, it would be like I made it all the way to the Terra Tubes without dying on my first ever play through. I am so lucky to have had the opportunity to take the company this far with all of you. I'll now take some time to decompress (FYI I'm looking for a good fat camp to lose my Groupon 40, if anyone has a suggestion), and then maybe I'll figure out how to channel this experience into something productive.

If there's one piece of wisdom that this simple pilgrim would like to impart upon you: have the courage to start with the customer. My biggest regrets are the moments that I let a lack of data override my intuition on what's best for our customers. This leadership change gives you some breathing room to break bad habits and deliver sustainable customer happiness - don't waste the opportunity!

I will miss you terribly.



The guy does have reason to be terribly proud. My take is that moving on is the best thing for both Groupon and Mason. The guy is set and it will be interesting to see his next adventure.

Have the courage to start with the customer. Good advice.

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Posted in Customer Focus, Management, Startups, Stocks

Facebook's Impact On Startup Valuations

Jun 06, 2012

Seems to be quite the subject these days.

Paul Graham says, or at least an investor does, that startup valuations are heading south. Fred Wilson pretty much agrees for later stage companies (and agrees that FB is overvalued).

My take. It does not matter. Unless your startup has over 50% of the U.S. using it, has raised hundreds of millions of dollars in venture capital, went public at a $100 billion valuation, shrewdly maximized the money put in its coffers by pushing its IPO price to the limit, and you have somehow managed to remain CEO while still controling the company. Then it matters. That has happened once in the history of the world. Facebook, like its purchase of Instagram, is an anomaly. It does not matter.

Sure early stage valuations may come down. They should. What Facebook has shown is that private valuations are out of line with public valuations.

That does not mean startups can not raise good money or find good exits. While the argument can be made that the Facebook impact had not worked its way through the system yet, Oracle's purchase of Vitrue for a reported $300 million and Salesforce's purchase of Buddy Media for $689 million are exhibit A and B. Both companies in the social space. Both companies with solid exits for all involved. Both companies valued at north of 10x revenues. Everybody is happy.

For the vast majority of startups Facebook's impact on valuations does not matter. It is an externality that may not impact you and even if it does it is one that you can not control. Go build your business with a focus on getting to profitbility with as little investment as possible.

You do that and everything else will take care of itself.

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Posted in Entrepreneurship, Social, Stocks, Venture Capital

Facebook Is Overvalued

May 18, 2012

Before I go any further I want to give some kudos to Facebook. More than half the people in the United States use the social network. I think the number something is like 900 million worldwide. Facebook is an important consideration for any marketer. And you have to give it to Zuck. Despite donning a hoodie at inappropriate times he has matured as a business leader. He is completely in control of Facebook. And a billionaire before 30. 

So great job to all the good folks that work at Facebook, their investors, and the founders. At 11:00am today Facebook is going to go public and their life will change forever. Congratulations.

With that said, Facebook is going public at $38 a share. That $38 puts the company's market cap at $104 billon. That is the biggest IPO valuation ever by an American company. It will make Facebook the 23rd largest US company by market cap (larger than Amazon) while being beyond the 900 mark in terms of annual revenue. 

Last year Facebook had $3.7 billion in revenue and generated an even $1 billion in earnings. The valuation is 28x revenue and 104x income. The P/E is 106 compared to Google's 18. The stock may pop today in a frenzy, driving these multiples and ratios even higher. Seems a little rich. 

Facebook, my friends, is overvalued.

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Posted in Social, Stocks

Is Facebook A Fad?

May 15, 2012

That is what the survey says.


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Posted in Social, Startups, Stocks

Think Different

Oct 05, 2011

Steve Job 1955-2011

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Posted in Angels, Business, Computing, Current Affairs, Customer Focus, Deals, E-Commerce, Entrepreneurship, Film, Fun, Games, Internet, Management, Marketing, Mobile, Music, Networking, Personal, Photography, Presentations, Science, Social, Startups, Stocks, Web/Tech

Correcting the Cat

Jun 22, 2011

Over on the Groupon blog Groupon the Cat is creating quite the ruckus. It seems like Mr. Cat wrote a little blog post about "The Groupon Guide to the "Quiet Period." In it Mr. Cats states:

The “Quiet Period” is the time right before a company “goes public,” during which it is legally prohibited from saying anything to the press that may make the company look “good,” “successful,” or “not currently on fire.”

Not that I get great joy pointing this out but Mr. Cat is wrong. During the quiet period a company is indeed not allowed to publicly say anything that might be considered as pumping the offering. However quiet periods are not restricted to the time before a company "goes public". They generally apply anytime a company issues a new public offering regardless of if that offering is the initial public offering or a subsequent offering.

In 2005 the Security and Exchange Commission modifed the quite period rules so that they did not fully apply to "well-known seasoned issuers". Well-known seasoned issuers must either have a publicly traded market capitalization of at least $700 million or have issued at least $1 billion in securites other than common equity over the past three years. These well-known issuers represent approximately 30% of listed issuers and accounted for about 95% of U.S. equity market capitalization. 

So regardless if it is your first public offering or your tenth, if you are in your registration period you are required to be quiet. Even if you pretending to be a cat.

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Posted in Business, Current Affairs, Fun, Stocks

Stock Update

May 22, 2008

To paraphrase America, I tried a Q4 update, but I got so damn depressed, that I set my sights on May and got myself undressed.

Boy were things ugly three months ago.  As is the norm, Knology was the last of the stocks in my portfolio to report earnings. Here is my quarterly (well bi-quarterly) stock update.

AAPL.  What a yo-yo.  $160 to $200 to $120 and back to $190.  I have faith that the penetration that I am seeing in the world of geeks is going to spread.  Holding.

ELNK.  Got a nice bounce to a 52 week high after the earnings call.  I sold my position.

KNOL.  Knology spent most the the last six months in a slide then got a pop on Q1 earnings.  That is all I needed to sell.  And I did. With a $3.00 basis costs $14.63 is a nice return through 41 months.  I will take a 130% annual return any day.

NFLX.  Same story as six months ago. Blockbuster pulling back on marketing and Movie Gallery filing chapter 11 results in strong subscriber growth at NetFlix.  So much for those competitive pressures that were dampening performance.  Flew up to $40 before retreating to $30.  Up 38% in 12 months. Sold half my holdings to lock up some profits.

SCUR. These guys are making me sick.  Stock has gone from $10 to $5 in the last six months.  Every time they have an earnings call the stock drops.  I have lost faith in management.  I am not alone.  At the moment there is no resistance.  I need to unload it but will wait for a little recovery before I do so.

VMW purchased the stock at $100 on what I called "recent weakness due to misplaced concerns with Dell's purchase of EqualLogic". Shortly there after they issued guidance below expectations and the stock dropped 31% in a day.  It has recovered slightly and seem volatile enough to make further gains.

I took some of the proceeds from the above mentioned sales and went a bit earlier in the food chain with some private equity investments.

As mentioned previously, I made an investment in RTEV, an electric car company run by Mike McQuary

I also wrote a check to Profounder, an investment company focused on turning ideas and technologies into compelling opportunities for professional investors.  The company has not launched.

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Posted in Stocks
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