January 5, 2011

Facebook Goes For Gold

Looks good 'on paper'

The news hit just as the last morsels of Holiday over indulgence was digesting.

Goldman Sachs earmarked $450 million for their top private clients to invest in Facebook. The social networking juggernaut is currently "valued" at $50 Billion. This would just about get them into the Fortune 100 save one itsy bitsy issue - actual revenue.

This was not something new to the world of VC and high-tech.

During the heady days of 1995-2000, billions were made and lost on paper in some cases in a matter of hours. The dot-com boom bubble bust caused stock speculation
to go off the charts.

Simply by owning a sexy website address, guys in basements were suddenly living the high life in posh offices in Manhattan. The problem was that most had no ability to make actual money on any actual product or service. This is not unlike the vast majority of start-ups today that have the coolest neato gadget solution for something we don’t even know we need. Many embrace the strategy that Google will eventually buy them.

But we’ve learned our lesson, right?  

Dot-com billionaires continue to live among those who lost their shirts before even owning a shirt because there wasn’t a shirt in the first place. The wasteland of marble floored office complexes and Herman Miller chaired boardrooms collected dust faster than they could collect revenue.

Despite the ever increasing appetite for online social networking, many are looking at the Facebook | Goldman Sachs relationship cautiously and with significant concern.
If a website lost its speculated net worth in a matter of days during the dot-com bust, even the almighty Facebook can falter under its hoodie laden wonderkind.

Person of the Year

Facebook CEO and 24% shareholder Mark Zuckerberg saw his bottom line almost double in 24 hours. His estimated personal wealth is in the $15 Billion range.  All the while, tech investors continue to hope for a Facebook IPO and it is doubtful Goldman Sachs will be waiting patiently.

What are you thoughts?

knealemann | email

image credit: googleimages

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