Start Up Blog

Facebook IPO repurcussions

Posted in entrepreneurship by Steve Sammartino on February 20, 2012

The upcoming Facebook IPO is a very interesting scenario. Not just from a startup / social media or tech point of view but from an economic one. There are a lot of facts and figures being thrown around, but from my point of view I’m interested in just a few of them and what they mean for tech entreprepreneurs:

100 Billion Valuation: If the IPO is successful the expected valuation is 33 times their current revenue. And around 100 times their earnings. For comparison purposes Apple current has a 14 times earnings ratio while Google has 12 times. Both companies which have established and growing revenue streams. I know which companies I’d rather hold stock in.

68 Million in acquisitions: In the past year Facebook invested $68 million in purchasing other companies. They have an appetite for acquisition. And that appetite will only grow when the pressures of being public come to the fore. It means that startups who have invented ways to extract money from the Facebook platform are well placed to be bought by the mothership. If you have an idea on how to do this get moving, because the stock market pressures will ensure that startups with revenue generation via Facebook will be targeted.

The IPO will create 1000+ new millionaires: All of which will feel a sense of ‘owing the tech community’. Many of whom will feel like tech rockstars and want to start their own Angel funds. Which means there will be more startups being funded by the FB IPO gold rush. If there was ever a good time to seek money from the Valley, post FB float will be one of the good ones.

 

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2 Responses

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  1. Tom Howard said, on February 21, 2012 at 4:02 pm

    Great post Steve, but one comment:

    The 100x P/E ratio is just a matter of where Facebook is in its history; it says nothing about how objectively better or worse it is compared to Google or Apple, merely that they’ve been around longer and are more mature companies whilst Facebook is still a growth company that is yet to reach its earnings potential.

    Apple’s P/E ratio at IPO was about 100, whereas Google’s was over 200.

    Individual investors – evidently yourself included – may choose to invest in more mature companies with lower P/E, but the trade-off is lower growth potential.


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