Lorenzo's comments

Awesome post! You guys deserve it. Congrats.
on How Udemy raised $1,000,000

Great post.
on Web video just grew up

@Jeremy - Great comment on the Vator investment. I completely agree. However, the Demand Media IPO is actually perfectly timed the amount of capital they've raised and the revenue they are generating. If the markets hadn't come to a standstill their Series D financing (at a billion pre-money) would have more than qualified them for any exchange in the world. In fact, if you look at many of the venture backed IPOs this year, few of them have a market cap of more than $1 billion. This one certainly will and that's a benefit to all entrepreneurs also, because an IPOs liquidity generates new employees and new businesses faster than almost any private company (other than Facebook) can.
on Demand Media files for IPO

Great article Matt.
on Microsoft sold your privacy (thank goodness)

That's an awesome post Eric. As far as aftermarket support, I'm guessing that tons of firms would love to be a syndicate for the shares to their retail clients just to say they did it. A lot of research has suggested that i-Banks don't make "profits" on offerings, but rather on the secondary activity anyway. Also, most of the legal and accounting work is surely being done already for a company at this scale, and that gets capitalized if they go public (so no impact on EPS). It would be great to see a company that's actually in a position to do something like this give it a try. Also, the savings could probably further offset the employee restricted stock unit overhang?
on Facebook's self-underwritten IPO

Very cool (nice piece also).
on Google introduces Google TV

Nice story - I think Google could have moved more units if they had more transparent pricing that was more competitive with carrier subsidized handsets.
on Google must walk softly and carry no device

Yes, we agree, but for different reasons :) The press and 90% of VCs in fact think that pre-money/post money value is close to company value (or enterprise value). That’s only true if an IPO is eminent, and even then the VC pre-money calcs are totally different than the i-Bank pre-money calcs. Because of this, they (press/certain VCs/others) often simply say $X amount invested divided by fully diluted % acquired = company value. There are literally thousands of ways to prove that's not true. A great example is Groupon. Look around the web and you'll see a ton of press reports on Groupon's "$1.3 billion +- valuation." It's not the company that's valued at $1.3B, it's the investment of $135MM that is, of course, valued at $135MM on the date that money comes in. So then the equation becomes "If Last Round = $135MM in value, what's the sum of the other security values in the company on that date?" Unless the company did an IPO, I can guarantee you that each of the other securities are valued (on a per share basis) at something less than that last round (but certainly something more than what those prior investors paid in this particular case).
on How long can DST disrupt venture economics?

Thanks Matt. But to confirm, I don't believe the DST valuations are distorted. It's the interpretation of those values by media, certain investing professionals and so forth that need a bit of correction. DST's strategy, and what they get for what they pay, seems perfectly reasonable to me.
on How long can DST disrupt venture economics?

Nice piece Matt. I think DST is essentially the market maker for social media related companies that have achieved scale. However, I think there's also a lot of confusion over the "valuation" of these transactions. Not on the part of DST, they appear to know exactly what they are doing with respect to valuation. The Tencent transaction speaks clearly to that. But more confusion on the part of people that simply divide the amounts DST invests in companies with complex structures by the percentage of ownership they get and say “that's the value of the company. “
on How long can DST disrupt venture economics?

Great story. I know that quickly moving units and getting share are critical in this space. But the Droid subsidies effectively gave it a lower price, I think, than the Nexus One. Also, I think the ads running with claims of "From just $179" were a little misleading, since most people that didn't want to switch to T-mobile were looking at almost three times that amount ($529) to get one.
on iPad losing the race to 1 million units

Great article Chris (love the graphic also).
on Social media consumption on the rise

Hey, thanks for saying that Chris.
on Jive Software acquires Filtrbox

Great piece Chris! But that doesn't say it all. You manage to be a journalist <a target='_blank' href=' http://bit.ly/youWroteIt '>["http://bit.ly/y...</a> (in a traditional, get the facts, etc. way) and also a new media person <a target='_blank' href=' http://bit.ly/VTVEco '>["http://bit.ly/V...</a> - I think we are lucky to have people like you, Matt and Meliza (with Bambi directing things) . 10 years from now everyone will really appreciate the significance of what you do as a team. Thanks for another great story (written or in video form)
on Jive Software acquires Filtrbox

Great article Chris. Based on the B-1 stock price of around $9.5 per share, Zynga's option pricing method value is probably around $1.8 billion. The WSJ article estimate is probably based on taking $9.5 * their estimated shares outstanding. Although that's a common way journalist estimate the value, it overvalues the common shares and thereby overvalues the company. Still, with the revenue estimates people have for the estimated enterprise value range is fair.
on Zynga scores a whopping $180 million

You have excellent timing Matt. I was just having a related discussion with two separate parties on this yesterday. Great piece as usual.
on Mid-stage cleantech braces for bloodbath

Thanks for the timely information Matt. I wouldn't count on that provision getting very far at all, frankly. There are some very active, vocal and effective members in congress (one from Boulder for instance straight from the ranks of high-growth, VC funded companies). Earlier this year when committee members that didn't know better suggested including Venture as part of the "systematic risk" related regulations, knowledgeablemembers helped educate their peers and put an end to it. Also, there's simply not enough money at stake even if venture returns somehow magically improved 5X on average. This essentially targets (unfairly) the investing partners since it's on the carry and, based on fund statitics, would come out of the top quartile performers only (since that's where carried interest comes into play). Multiply that by 15% or 35% and it's less than a rounding error (so has no good impact no matter how you slice it).
on New tax legislation could push VCs to China

Nice story. I agree with Ezra about the Vator company updates :)
on Top 10 biggest social media stories of 2009

Thanks for saying so Michael! I appreciate that.
on Many banks only insuring $250k again

Very, very nice Chris. Nicely done.
on An inside look at Backblaze

Great article - awesome interview.
on VCs get creative about consolidation

Great piece and great comments by Gary (as always). The concept you refer to is sometimes referred to as royalty payments, or as participation notes, where a percentage of revenue is the investor's payback. As Gary points out, the issue is that with early stage high growth companies, revenue growth is less of a desire than growth in the value of the company (capital appreciation). However, I believe there's a good argument that smaller, more nimble web companies can and often have generated enough revenue to a) cover founder living expenses and b) share a portion of that revenue with a small investor as a meaningful return. Nice analysis Seth.
on Debt, equity and a third thing that may work

That's awesome! Would love to see the video of it also.
on You are now free to rock, online

That was a great interview.
on The venture capital industry isn't broken

Also, I just read the proposed legislation. This isn't really changing anything - the exemption relates to 404(b) - which in its simplest is additional auditing of management's assertions [404(a)] concerning internal controls. Small companies have effectively been exempt from that provision [404(b)] (but are and will remain subject to all of the other costly provisions).
on Get ready for lots of small IPOs

Great article Matt. However, a "market cap" of $75 million is very, very small no matter how you measure it. Still, how you measure it does matter with respect to if this relief (which is welcome) will result in quality deals getting out the door. If its number of shares outstanding X offering price (or bid price), it may make a nice space for biotech companies that have lost favor with private money but need to buy time, but not a lot of other companies relying on the venture model (even with NASDAQ small cap requirements, it’s a tight range of value before all of a sudden their audit and legal fees double). As a result, the costs of going public for these companies (which also impacts value) probably won’t change materially. If the market cap ceiling is based on the value of shares held by the public (or the float * offering or bid price), that would of course open the door to a lot more companies and provide meaningful financial relief. Either way, this is progress. But the beneficiaries (for better or for worse) are probably very, very small pubicly traded companies with little or no real trading volume. Perhaps the Senate will increase the limit to under $200 million :)
on Get ready for lots of small IPOs

Gary, that’s a timely suggestion and question. As you may recall, there were several VCs (some of them quite successful and famous, such as Draper Fisher Jurvetson) that attempted to make venture type returns accessible to retail investors by way of a publicly traded vehicle (similar to a mutual fund). One of the reasons your comment is timely is that Congress just backed down off a new proposed reporting requirement for venture funds. A major issue for turning a venture fund into a public entity is how do you measure net asset value (NAV) for a class of securities that are so uncertain for most of their early lives? This change in unrealized value would account for most of the initial “earnings” of any fund. To put those challenges into perspective, think Enron. Historically, VCs have tried to be conservative with respect to value, which is a safer bet. Until relatively recent accounting rules (the same rules blamed in part for the volatility of earnings at Ford, Lehman and so-forth), VCs kept their investments at cost unless something really bad happened or something really good happened. Another challenge involves how do you keep certain strategic information private and still comply with the disclosure and financial reporting requirements of a publicly traded company? That being said, I’ve always believed there’s a place for such a model (a mutual fund for high-growth early stage bets), but haven’t really seen it executed successfully on a large scale in our country. An easier alternative, I believe, might be to simply have debt issues (zero coupon venture bonds) priced to deliver a comparable return to what people look for a alternative assets to return (14% per year or so)?
on Is it time for private company marketplaces?

Michael, that’s very interesting. I think you are implicitly referring to two different (but related) types of risks. One would be the risk of fraud, which you might say is ultimately a quality of earnings issue and the other is the risk of a variation in returns compared to the “risk free rate” (lots of ways to measure, but an easy one to understand and test is the Sharpes ratio). In periods of great liquidity for early stage companies, one could argue that the risk of fraud is comparable to what it is for public companies (it’s a matter of how many people are involve, how much money is involved and what’s really important to the participants and society). Remember when the metrics of page views, users and visits first became proxies for valuation back in the mid 1990s? I can assure you from personal experience across a wide range of companies during that time that those statistics, which were driving financial decisions (investment decisions), were often massaged to say the least in order to justify higher valuations. With an IPO within just a few years of starting a realistic objective, and peers that may have made millions in months at “lesser” companies, the lines between marketing puffery and securities fraud can start to blur. “Fifteen million dollars is not money. It's a motive with a universal adaptor on it.” That being said, I personally agree that investing in “3 guys from MIT” should outperform most indexes, assuming you can make enough bets (50 to 100) and there’s a source of capital to finance later stage growth and liquidity (which brings you back to some kind of public marketplace ultimately).
on Is it time for private company marketplaces?

Great points Gary (as always). I agree. I don't know that Sharespost is a "market maker" per se (they don't perform the function of a specialist or a broker dealer at this point). However, based on my understanding, they provide an infrastructure that cost effectively addresses the barriers to engaging in these types of transactions. You can register for free on their site, and you'll notice that there are a collection of legal forms as well as relationships with parties (US Bank) needed to clear transactions safely <a target='_blank' href=' http://www.sharespost.com/pages/legal '>["http://www.shar...</a> As far as institutional investors versus high-net worth individuals, I also agree that it's a rich person's game. However, statistics show that a very large percentage of individuals participate in this area (as angels and as members of loosely organized investing groups). Like many high-growth deals, the risk of losing 100% of the capital invested often exceeds the probability of realizing the investment multiples required to justify such an investment. It's possible, I believe, for an offering such as Sharespost to provide access to an investment stage (post series A/B, post marque VC lead investor, pre-IPO) to get in to high growth investments at a different stage of the risk profile. That could help diversify their holdings of this particular class of investments (alternative assets) and therefore improve their outcomes. However, only time will tell if that opinion (just my personal theory) is accurate.
on Is it time for private company marketplaces?

Wow! That's quite an in-depth take Michael. I agree about the lack of transparency in SEC filings. The intent of the complex disclosure requirements is at odds with what's become a "check a box" approach. With tons of boxes, you end up with 250 page registration statements hardly anyone reads and another 200 to 600 pages of Exhibits that a person has to spend weeks analyzing to put into a context. It's sad that this information (on public companies) is not approachable by anyone (it's not complicated stuff if presented properly). But when the important SEC filing information (items needed to easily determine cash flow potential and, therefore, value) is surrounded by explanatory notes that require a degree in law or accounting, everyone has to either rely on analysts to make a decision or just take a chance based on herd or gut instinct.
on Is it time for private company marketplaces?