Facebook’s IPO was a success, not a flop.
As promised while under the influence, these thoughts are now making it online:
The fact that FB’s stock price closed at 38.23 on its first day of trading (a rise of $0.23/0.61%) is NOT a sign that there was/is a tech bubble or that said tech bubble is bursting. AND it should not follow as a direct corollary in commentators’ minds that this is the main reason why Zynga, LinkedIn et al dropped by more significant %s on the same day. The FB IPO was a success, not a flop. And the company proved that it’s not just dominant in the world of social networking… it can do corporate finance better than the rest too.
As anyone who gets basic finance knows, underwriters normally screw companies at IPO. They price IPOs at a level that keeps the companies relatively happy in the run up to IPO, but not always at the value they reach on trading day. The result of this is that the often large increase seen on trading day are reaped by the underwriters and a limited pool of first day investors, NOT by the companies. In fact the companies just got stiffed out of a huge % of value that they helped create!
Sure there’s a price to underwriting, to compensate for the work done and the risk taken, but this is recognized in an underwriting fee, often as much at 7%, although in FB’s case 1.1% of the $16bn issuance. When underwriters are making $176 million why would anyone leave value which should accrue to the company on the table for others?
Google avoided this issue by taking the untraditional approach of running a “Dutch Auction” IPO (good CNN Money article here: http://cnnmon.ie/J4KuIj). They could do this as the IPO was massively oversubscribed. In the early days of FB IPO discussion it was mooted whether FB would do the same. They didn’t. Instead they kept almost the full issuance value in their pockets by (i) negotiating touch fees and arrangements with a large syndicate of underwriters, (ii) managing the underwriting and pricing process very tightly, and (iii) playing off the extensive second market pre-IPO trading prices.
All of these factors helped ensure that FB did not hand the value it had created to those not deserving of it. That should be applauded. Did a tech bubble burst yesterday? No. Did the world’s largest social network prove that it could look after itself and that tech IPOs and its corporate financing can be run well? Yes.
If the drop in price of other tech stocks was related to the minimal FB price rise, then it should be because FB just proved that they were muppets.
Here’s hoping this is a lesson to all: huge rises on trading are a BAD thing. They benefit underwriters and a limited clique of investors, but they show a company giving away value out the gate…
On not launching at SXSW
Until this year SXSW was talked about as the holy grail of launch opportunities. Spurred by the apocryphal stories of pre-pubescent Twitter and the (apparently bootstrapped) Foresquare, SXSW was where you went to go big.
Now, there’s no doubt it’s a great place to get noticed, and there is rarely a chance to rub shoulders with so many early adopters in a short space of time, but as many journalists have commented since this year’s festival, times, and SXSW, have changed.
This year was a particularly noisy SXSW, with a lot of startups turning up in droves trying to find the swag (love the ponchos!) and party promos to give them that lift (in the Karaoke bus…). At Echoer we decided NOT to focus on SXSW. We felt that doing so would jeopardize our product, our PR push, and more importantly our bank account. And even then we would have been playing the “noise lottery”. Like many decisions we have made at Echoer, you go on the best intelligence you have at the time, and I admit that on arriving I wondered if we had made a huge mistake… on leaving I thanked my stars that we had trusted our collective gut and wisdom.
Here are my takeaways on launching (or not) at SXSW and some advice for the uninitiated:
1. Remember those coin machines at fairs… the ones where you stick a coin in and hope the overflow on the shelf drops in your favor? That’s SXSW, but for cheques (nice one Davin). There are at least some ways to better your odds, but please heed the advice below…
2. If you’re gonna play the lottery, plan ahead. You may have only heard about Highlight the week before SXSW, but trust me, their planning for that event, the early adopter outreach, media rounds, article placement, relationship building, and street-team organization started months before. Probably in the second week of January at the latest, and then some.
3. If you believe in your product, why pick the noisiest week in the tech calendar to try and get your column inches? Just think about the numbers for a minute: even if you are THE blow-up app or product, you are, by definition, going to be jockeying for space in a heavily saturated field. Don’t cheapen your moment in the sun, and definitely don’t let others cheapen it for you.
As an aside, and I’d love to pretend that we strategized this, we launched Last Night Never Happened a week and a half after SXSW in 2011. There are a lot of reasons why we got insane coverage, but I would now firmly add that being in a post SXSW “quiet period” helped us a lot. It’s a sweet spot.
4. Do you have a plan? Are you busy adding killer features? If SXSW didn’t exist would you have a clear strategy of how to launch, who to speak to, and how to build value? Cool. Stick with it. If it happens to coincide with SXSW, awesome (and think about leading out there), but if it doesn’t, don’t jeopardize it or try and wedge your plan into a setup that doesn’t highlight your strengths.
5. You’re playing the long game now. The phrase “oh, there’s an app for that” says a lot. There is an app for that… and that… and that. Producing a cool app and getting a wave of early press doesn’t do it any more. Yes, there may be a blast of one time users when the news hits, but 2-3 hours after an article is published nobody’s commenting on it anymore. SXSW could turn that into 2-3 days, but the point remains - you’re going to end up with a killer app because you build long term value and have a strategy that goes well beyond launch. That applies to all of us, yes, even companies like Highlight (in fact, particularly companies like Highlight that are now in the spotlight…). There’s always space in the tech press for a good news story (and many bad ones too!), so focus on building the kind of product that consistently gives you something to shout from the rafters about. That’s how you’ll stand out above the noise. Value.
I had a great SXSW. I didn’t take in anywhere near enough music (“Hooman, enjoy that pass!”) or make all the sessions I wanted, but I did meet some great people and lay the foundations for relationships which I know will last well beyond that week or our launch next month.
Back at home base we’re excited for the months ahead, picking our own moments, and making sure Echoer becomes all it can be once it hits your smartphone.
Daniel
Dear Canadian Friends & (surrogate) Family
Today, the app I have been helping to build, Echoer, gets launched throughout Canada for iPhone. Echoer is a thought-sharing platform that allows you to literally see the thoughts around you at any location you’re at and leave thoughts for others to engage with. It’s good, wholesome fun, and we have great plans in the works for this!
To spare you the gory history and launch details, here’s what we are asking friends to take 5 minutes to do in the next 48 hours:
1. Download the FREE app at this link - http://bit.ly/downloadechoer
2. Give the app a rating (we love 5-stars… I mean who doesn’t) and feel free to write a review.
3. Open the app and use it - input your thoughts, see who’s writing what where, “amp” up other thoughts you agree with. Thought-experiment and fritter your time away! If you feel a bit stuck, check out the demo here: www.bit.ly/echoerdemo.
4. Spread the word (to your Canadian friends and family) - tweet, post on Facebook, and share the download link. Or just chat it up in the “real world” or “meat space” if you will.
On behalf of Team Echoer - merci beaucoup!!!
Yours,
Daniel
PS: We’ll be doing very some cool events in the next few weeks - I’ll be sure to keep you in “le loop”. The fun kicks off this weekend at Nuit Blance with www.visualvoicegallery.com… how aptly named!
And it’s up…
@echoerapp
So this is how rapid-fire how-to videos are made… @gsimeo @elibatalion @sydwise. Look at the star of the show sitting there serenely in the last shot. Go Echoer!
Why Eli Batalion Rocks
I don’t have long to pen this as the train from TO to MTL pulls in soon, but I wanted to take a moment to pay homage to Mr. Eli George Batalion. The man (boy?) is a star. For some unknown reason he is able to tolerate my inanity and just put up with five days straight of me (I can’t recall many an ex who has managed that with a smile still on their face afterwards). My respect and esteem for you has swelled just like a condom pumped full of water. Eli, if you were female… well, Eli, it’s time to find you a battalion of future Mrs. Batalions. Let’s do it.
Top five reasons why Eli rocks:
1. His beard-thing
2. His insanely brilliant (and extremely dry) sense of humour
3. The fact that he uses the word “granular” more than me
4. His voiceover skills (see: www.vimeo.com/32623519)
5. The fact that he just suggested producing a faux infomercial with him in a beige sweater sitting in a kitchen writing about Echoer, a girl next to him, naturally raving about seeing all the thoughts around her, while Eli replies (in an Australian accent) “that’s right sheila”.
Homage. Word. Out.
Eli and I breaking up in Starbucks (please see the post below this one)
Breaking up in Starbucks
Couple five meters away from me, you’ll never read this, but nonetheless I feel the need to vent. IN WHAT WORLD OR CITY is it acceptable to do a post-breakup analysis for over an hour and a half (and counting) in public, in starbucks, in earshot of others. You have left a cloud of incredulity over my morning. If you were 16 I would get it - I did that too. It was kinda fun, in a self-indulgent way. But you, dude, are about 28 by all guesses, and you, chick, are better looking, clearly nicer, and for some reason wasting your Saturday morning with this.
OMG, why are you now pulling out your phones and doing a blow by blow of how and why it went wrong (as narrated by your text message history), what text A meant, why text B was phrased the way it was, etc. It’s over, move on.
And yes, “if your grandma dies I want to hear it from you and not someone else”. Totally. Word.
