Friday, May 20, 2011

Tech bubble, LinkedIn IPO

We are facing a large dotcom bubble fueled by venture risk investment funds, with 4 representing companies: Facebook, Twitter, Foursquare and Groupon (investors who are dragging other investors to continue investing until they can sell shares of the company and recover leveraged money, but the last holder of shares is going to lose).

Many technology companies, without having a concrete business model (supposedly will generate revenue from advertising and premium subscription accounts) receive millions of dollars in funding to offer something free, acquiring fastly a large mass of captive users as if they had made them addicts, and then the exit strategy (for investors) is to get someone to buy the company at a staggering figure, as did Blogger, Fotolog, MySpace, YouTube, Skype, Bebo and others. They are like continually inflating balloons and they need to find a buyer before they explode. Recently Skype (a kite) was privately sold to Microsoft at USD 8,500 million. Skype was first sold to eBay in 2009 which resold to a private group of investors.

In 2003, 3 friends come together to create each one his social Web site, Reid Hoffman created LinkedIn, Tribe created by Mark Pinkus (then he created Zynga) and Jonathan Abrams created Friendster. Tribe and Friendster were commercial failures, while LinkedIn could never got a private buyer. To sell the shares and turn those pieces of paper in real money, LinkedIn had the strategy of going public, to start trading its shares on the New York Stock Exchange. If LinkedIn could not find a buyer, it will get thousands of buyers purchasing lower small parts (shares).

1 comment:

  1. Little typo: it's 8.500 Billion

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