I probably don’t make too many friends saying this, but I predict that our generation’s answer to Pets.com won’t be Dogster.com (that actually makes sense), but rather, the Slide’s and Rock You’s of the world. I could be very, very wrong… but no way is Slide worth $100M, let alone $500M.
Anyway, if what Tech Crunch is saying is true - that Facebook just deleted one of Slide’s applications - then Slide might not be worth $5M, let alone $500M.
Investors in Max Levchin’s ride (still don’t understand how someone who helped build PayPal would think that Slide is a good way to deploy his skills but then again, who cares what I say) might want to read up on our post on why building your business on Facebook might not be a grand idea and shall inevitably slide you into oblivion.
Mind you, the way the Web is now operating in bizarro mode, maybe this is a glitch and Facebook will apologize for the mistake and reward Slide with even more shelf space of its otherwise useless and nefarious apps.
Or, maybe, the bong effect has worn off Mark Zuckerberg and he realized that his otherwise useful and intuitive social network was becoming as valuable as a warm bucket of spit thanks to the Rock You and Slide’s of this world.
Worth noting that Founders Fund (Peter Thiel’s fund) is an investor in Slide, Thiel is an investor in Facebook. If this is not a mistake and Zuckerberg did in fact put the kibosh on Slide, then I am sure Thiel has been in the middle of some interesting exchanges in the last 24 hours, but, of course, we’re speculating.
Step 1: After f*cking over Sean Parker at Plaxo, Sequoia is shunned from participating in Facebook funding, who raises money from former Paypal President Peter Thiel.
Step 2: Sequoia is snubbed once again from Facebook craze when Slide - founded by former Paypal encryption wunderkind Max Levchin - launches slide show maker for social networks. Social networking craze ensues… then starts to fizzle.
Step 3: Having had enough of being shut out of the FB ecosystem, Sequoia leads Series A (in January 2007 at $1.5M) and Series B (in March 2007 at $15M) rounds for Rock You, Slide’s arch enemy in FB app ecosystem. Note timing of Series B: right before FB launches apps.
Step 4: Realizing FB apps is as valuable as a warm bucket if spit, Sequoia (along with initial investors First Round, and Lightspeed Ventures) pass on investing in Series C round to display greater fool theory in mimicking Slide’s mammoth $50M round, get DCM to ride on Sequoia and First Round’s coattails by investing a $35M - the day after Slide says FB apps are pretty much useless. It’s worth noting, by the way, that according to one contributor on TheFunded, “would not take money from DCM if offered”.
Step 5: Sequoia can brag that they are participating and helped finance the FB craze… blah-blah-blah until next fad; DCM can claim that they invested alongside the great and venerable Sequoia.
Rock You now has raised over $51.6M in funding. Slide is up to $58M. That is early $110M in funding alone… would you pay $110M for both companies in a buyout?
I wouldn’t… see our first piece here.
UPDATE: Venture Beat notes: “Doll Capital Management led the round, providing $30 million. The remainder $5 million was provided by existing investors, Sequoia, Partech and Lightspeed.”
Yeah… that changes everything I said. Right…
M&A can happen quickly, but financing is a mind-numbing process that takes 6, sometimes 12 months.
As such, learning that Rock You just raised $35M for Facebook apps, you have to wonder, how do the investors feel upon learning that just yesterday, the #1 in this “space”, Slide, signaled a shift in strategy by stopping to develop new apps.
The money did not come from dumb money:
The round was led by venture firm DCM, with contributions from several private investors. Previous RockYou investors include Lightspeed Venture Partners, Partech International, and Sequoia Capital.
But all factors being equal, VC-backed ad-supported companies are prone to fail: no freaking clue how advertising works and too arrogant to admit it, too.
Three months ago I asked “why is there no YouTube fund” to match Facebook or iPhone funds, even though online video will be far bigger than social networking ads, and wireless ads is really hype driven for the time being (for the record, I am far more bullish on the iFund than the FB funds). Today’s announcement by YouTube that content owners can sell ads against their own content and monetize their content is validation and support of my argument that there is a need for a YouTube fund. After all, online video ads in the US is supposed to grow from $1.25B in 2008 to $7.1B by 2012… while social networking revenue projections are being reduced. To drive the point home: YouTube’s market share in video is more strangling in video than Google’s is in search, yet right now, YouTube only does $75-200M in annual revenues… so the upside - while both clear and unclear - is there.
As I said, some investors must be waking up today feeling rocked. To see how something so stupid can even happen, click here.
2007 marked a euphoric climate for valuations and fundings in the digital space.
- Facebook kicked off the festivities with a $240M investment on a $15B valuation [our coverage].
- Slide finished off 2007 with an insane $50M investment on a $500M pre-money valuation [our coverage].
When Google tumbled from $747 to $430, I presumed that valuations for digital assets would follow suit (not that they should, but valuations are tricky, it’s a function of demand and supply for a given deal, admittedly, but the landscape and climate affects it, too).
But, they haven’t. It’s also not like we are seeing a flight to quality.
Yes, Federated Media has great sites and authors in its roster, but it’s a company with abysmal margins, paying out 50% off the top to partner sites. Federated Media is looking at raising $30M on a $200M valuation. This after supposedly turning down a $100M buyout offer. Is Federated Media worth $100M?
Then Meebo comes out raising $25-30M at a $200-250M valuation, too. Meebo streamlines IM, I see the value, granted… but would a company really pay $500M to acquire it? Maybe. Don’t know.
Then today, Slide competitor RockYou hints at raising money at a $400M range, as well. We know about the challenges and obstacles to monetizing social media… and even those who fueled the social media boom are unsure of the merits today.
I know that digital provides a sanctuary in a slowing economy… but I am nonetheless surprised at some of the torrid valuations these days.
PLAY
