Thursday, September 23, 2010

Mark Zuckerberg in Forbes 400? Number 35? Please.

Very irresponsible of Forbes to list Mark Zuckerberg in the Forbes 400 when it's still paper wealth. When did Forbes start listing people's wealth based on private company valuations? Look at Slide or RockYou a couple years ago and now? Ning a few years back and now? I'm not saying Zuckerberg won't be a billionaire, but his company hasn't been acquired or gone public, and I hardly consider secondary market valuations valid.

Seriously, do eyeballs and traffic mean that much to you, Forbes? Obvious answer.

UPDATE: Gigaom's Matthew Ingram has a post related to this, "Is Facebook Worth $33 Billion? It’s Complicated"

My quick comment on his post:

I don’t believe you took the middle road or even lean towards saying Sharespost and others are valid markets. Would you invest your 401K into it? Your nestegg? Seriously. I would hardly call secondary markets for startup shares a valid market or even try to compare it to public stock marets with millions more data, infrastructure, researchers and participants. Come on!

So you would agree with the valuation of Slide or Ning a few years ago? Maybe. Would you now? No. Valuation of private companies is not a science but an art. That’s startup 101 stuff.

You should really analyze how valuations were created for various startup companies and then explain how any startup’s valuation is justified as much as Google, Cisco, Apple, etc. It’s a frenzy that valued Slide at $500 million not some analysis based on revenue, cashflow or industry comps.

“Hmm, you guys are pretty hot, so I’ll agree with that $100 valuation…”

“5 engineers from Google and 10 signed deals with Fortune 100 companies… (and 3 competing term sheets) okay, $50 million pre-money for your Series B sounds fair.”

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