I like playing this game. It’s a game where you have to force yourself to choose to invest between two (arguably) overpriced companies. I’m been doing it once a year between Foursquare and Quora. Go ahead and make your vote there.
I read today in a good article about LinkedIn’s business that the two companies LinkedIn and Salesforce.com have the roughly the same market cap at $30 billion (Linkedin lately has cruised past it even more to $32). So here’s the game: If you had to put 80% of your entire life savings into stock of one of these companies, which do you choose? A breakdown:
- Current market cap: $32 billion
- 2013 Q2 revenue: $364 million
- Net income last quarter: $3.7 million
- Growth rate: 12% last quarter & 60% over the last 12 months
- Current market cap: $30 billion
- 2013 Q3 revenue: $957 million
- Net Income in Q3: $76 million
- Growth rate: 7% last quarter & 31% over the last 12 months
I think from these comparisons, you can see that SF is twice the size, but growing at half the rate. If both companies keep growing at the same rate, LinkedIn will be bigger in 5.5 years and almost double the size of Salesforce in 9 years. The market really rewards growth and doesn’t seem to care about profits from newish companies.
Personally, i’m putting my money into Salesforce, but it’s interesting to see how much the market loves LinkedIn. In my daily work life, i use both. We have all our sales information in Salesforce and can’t operate without it. All of tools plug into it (Eloqua, Totango, Desk.com, etc.). At the same time we’re hiring and not a day goes by where i’m not looking at someone at LinkedIn or trying to contact them through that platform. It’s proven to be invaluable when hiring. I can see it breaking into new businesses and growing fast.
That said, i can’t see Salesforce being replaced any time soon – and the pricing is much better. We pay less than $1000 a year for LinkedIn (for the ability to message people) but well over $30k a year for Salesforce.
Who would you bet on?
There’s an interesting new website called OneSeason.com which is a virtual market of sports players. You buy shares in athletes and players and based on market demand of those shares their value raises or lowers. For example, two weeks ago Lebron James was at $1.10 and today he’s at $18.50 because his shares have been rising steadily.
The fun part is that new players come out each day in an IPO (Initial Player Offering). For instance Yao Ming came out at $5 and immediately traded up to $15. Each day there’s a reason to get back in
There’s a NYTimes article about this where it talks about the “value” of a share:
Mike Sroka, OneSeason’s founder, a former hedge fund analyst, compares OneSeason stock to collectible playing cards. “The cards have no intrinsic value, but due to limited supply and notoriety of the player, they fluctuate in value,” he said.
The one problem i see is that every player is appreciating right now. No player has gone down which means nobody has lost any money. A quick way to put OneSeason out of business would be for everyone to request their money back. I’m guessing this won’t happen but still, you’ll need losers eventually.
I’m putting in a couple bucks and trying it out. It’s definitely interesting. Am i moron for falling for this? I just bought 3 shares of Adrian Peterson for $25 bucks a piece. We’ll see what happens. I’m selling if he hits $50
This is an article/blog post by Fred Wilson who, in my mind, is one of the best VC’s out there. He’s invested in Feedburner, Tacoda, Twitter and others and i’ve found that his opinions are usually on the money.
He wrote a good post today about how his firm manages their funds and in that he shows the assumptions they have for size of investments, length, carry, etc.. During my pitching process, I found that almost all VC’s operate somewhat like this – with bigger funds having bigger investment sizes. This is great information and would have been helpful a few years ago as knowing how you fit into a VC firm’s plans helps you figure out on how best to pitch to them.
Anyway, i was amazed he’d share this info on a blog and thought it was interesting. Post is here: http://www.avc.com/a_vc/2008/08/venture-fund–1.html