Oct 06
11
Analysis of the YouTube deal
Not surprisingly there has been a lot of discussion about the YouTube deal.
The New York Times had a very detailed analysis of the deal. I was particularly interested in the view about the VC that was involved in this deal, Sequoia Capital:
Sequoia, which is among the most successful venture firms in Silicon
Valley, invested a total of $11.5 million in YouTube from November 2005
to April 2006. It may be walking away with more than 43 times that
amount. Its stake in YouTube has been estimated at roughly 30 percent,
which would give it a value of $495 million.
That kind of
payday, especially for an investment that is less than 12 months old,
is unusual even in Silicon Valley. But it is not likely to rank among
Sequoia’s biggest. The firm, which was founded in 1972, has backed a
roster of technology superstars including Apple, Cisco, Oracle, Yahoo and Google itself.
Sequoia’s
go-it-alone investment in YouTube represents the kind of aggressive
move for which Sequoia is known. A more traditional and safer approach
would have been to share the risk and rewards with other investors.
That is especially true with an early-stage investment in a company
that since its inception has faced the prospect of costly lawsuits over
the copyrighted material that peppers the site.
I am already starting to see some waves of interest about one of the companies that we are involved in – as a result of this deal. And we have to now expect this deal to set a benchmark valuation for eye-balls just like happened in the late 90's in the first bubble.
What will make this bubble different?
Will we be able to get through to the other side without the same kind of bust that happened last time? I tend to think so. I think that what is different this time is that there is such momentum behind moving advertising online. And this play is all about advertising.