What would you pay for some of the hottest start-ups on the web? Following the $1 bn acquisition of Instagram, only two years old, by Facebook, everyone is trying to figure out which company will get acquired at an insane – and I do mean insane – valuation. There are plenty of hot social media and mobile properties out there right now, so folks with deep pockets have plenty of targets.
Take a look below: Business Insider calls these companies start-ups that could be bought tomorrow for $1 bn each. I don’t see it; I really don’t. There’s nothing in these companies that justifies a valuation of that size, at least not yet. Sure, these companies show a lot of potential, but they still need to perform before the big bucks are justified.
I think $1 bn is a stretch for any of these companies, but I guess it’s up to the buyers to decide. Let’s take a peek:
1. Square: Jack Dorsey’s newest project, Square is a very slick mobile payments tool. I have no doubt that this company has almost limitless potential. And, I can see both American Express and Visa as likely buyers. But, at $2 bn? The estimate there seems a bit nuts, even if the last round – $100 mn, led by Kleiner Perkins – came with an implied valuation of $1 bn. I can’t even fathom justifying a portion of that as the purchase of technology/intellectual property to drive future revenue growth.
2. Foursquare: are you kidding me? There’s no way this should – or could – go for $1 bn. In fact, I’m not sure I’d buy Foursquare for anything but seashells at this point. It’s rumored to have a valuation of around $1 bn, according to Business Insider, after closing a $50 mn venture capital round back in June. Yes, it could be an interesting acquisition for Groupon, but Groupon needs to find ways to fuel profitable growth, and Foursquare would take way too much work at this point to provide the results necessary on a $1 bn acquisition.
3. Spotify: okay, I agree with Business Insider that Spotify would be a good buy for Apple, and having raised $100 mn at an implied valuation of $1 bn, it won’t go cheap. While hThat saidas only a few million subscribers and has yet to break into the US in a big way, I can see the value to Apple, providing a new channel for music sales, especially if there’s a great way to enhance Spotify through the iPad. But, the company needs to (a) show that it can make more money on its own and (b) show how it can multiply that as part of Apple before the deal would make sense to me.
That said, as a long-term investment, it could be interesting. And, Apple has the cash on hand to be able to make long-term plays.
4. Airbnb: let’s be realistic: at the end of the day, Airbnb is nothing but a boutique online travel agency. Sure, it helps people save (and make) money by putting their homes up as inventory for travel customers, but it’s still just a unique twist on a travel booking site. Unfortunately, that’s a tough business. Could Airbnb be an interesting part of a major hotel’s portfolio? Maybe. It would require delicate management though, and I have no idea what the integration would look like. Business Insider mentions eBay, and that could be an interesting play, especially if it could be integrated into the broader eBay environment.
Amazon strikes me as a more interesting alternative, as it would provide a new way to reach into the travel space. There’s no way I see someone like Expedia or Orbitz making a move for it. The real problem here is that Airbnb raised $112 mn at a $1 bn valuation, so it can’t go for less than that, and I don’t know if it can grow into a higher valuation.
5. Rovio: well, let’s not call it Rovio; let’s just call it ‘Angry Birds.’ After all, the company hasn’t done much else. Could Rovio go for $3 bn, as Business Insider suggests? This one, I could see happening. And, both Zynga and Disney would be interesting buyers. Both would make sense. Zynga has reportedly offered $2 bn for the company already and been rebuffed. I’m not sure if I could see Rovio going the distance on its own, but turning down the offer in order to get more out of Zynga later is plausible to me.
6. Pinterest: a few weeks ago, I divided the world of acquisition potential in this way: Facebook + Pinterest, Twitter + Instagram. These struck me as the ideal tie-ups (and they still do). Well, Facebook snapped up Instagram, so now it’s time for the rest of the world to make a move. I don’t believe the recent $7.7 bn valuation guesstimate on Pinterest, and I’m even a tad skeptical of the $200 mn implied valuation from its last round of funding ($27 mn). Business Insider, based on current investor activity, suggests that the market believes Pinterest is worth more than $5 bn.
While it suggests Google and Amazon as likely buyers, I’d suggest Twitter. Google could do it – it has the cash, and Pinterest would fit well with the new Google+ layout. Twitter could use Pinterest as a way to amp up its photo capabilities, especially if Facebook winds up impeding Twitter interaction with Instagram. Amazon doesn’t make as much sense to me.
7. Fab.com: now, this is an interesting one. It’s not even a year old yet, but it boasts 3 mn registered users and more than $300,000 a day in revenue. It’s $50 mn venture capital round came at a $200 mn valuation. As to a $1 bn acquisition, I don’t say ‘never’ … but I do say ‘not yet.’ Fab.com is off to a great start, but it still needs to prove itself.
8. Yammer: I like Yammer. A lot. While there are plenty of social media tools for the B2B marketing space, few seem to be focusing on internal social networks. I’ve used Yammer and enjoyed it. Further, the market is viable, with the likes of Jive Software and others playing in the space. Business Insider suggests Salesforce as the acquirer, and I’m inclined to agree. Following an $85 mn financing round back in February, Yammer wouldn’t come cheap relative to its existing financial performance. This is another one I’d categorize as ‘not yet.’
Source: Business Insider