Facebook's Valuation Due to Supply, Demand Imbalance
Facebook, the social networking giant, is now valued at $65 billion and has moved up 30 percent in the last six weeks,making it one of the most highly valued private companies around.
This high valuation is a function of scarcity of shares that has created a supply, demand imbalance, according to one venture capitalist.
"These values are being pegged on imperfect information. With that said though ... we're about 15 years into what I think is a 50- to a 100- year major innovation cycle. I think there'll be a small number of incredibly important consumer brands that will merge out of the first 25 years," Dana Stalder, general partner of the venture capital firm, Matrix Partners, that helped bring Apple public in the '80s, told CNBC on Friday.
"Facebook without question is gonna be one of those brands and already has become one of those brands. It has all the attributes in terms of reach, and consumer engagement, and brand awareness, and growth to look like the next Google. Time will tell," Stalder added.
But, Stalder warned that there is a "massive reallocation of capital happening in Silicon Valley."
"You've got what are traditionally very early stage venture capital firms buying Facebook off of private secondary markets at the same time other early stage VCs are selling there shares on the secondary markets," Stalder went on to say."
"There is every characteristic of a bubble that you can imagine that is starting to emerge. We're seeing it really just in the private market though, we haven't seen it in the public markets," he said. "That's where we may get into trouble is when we see this start to shift into the public market in a meaningful way."
However, given the expected growth in the internet, Stalder's strategy is to look for investments at the early stage that have the right team, product strategy and market size.
"We get involved with founder entrepreneur at the very beginning of these companies with the expectation that we will continue to put money and time into these companies over what's generally a 5- to 10- year investment cycle," Stalder added.
"The vast majority of our time on the internet over the course of the next ten years is going to shift from PC like devices to wireless devices and that is going to open up huge opportunity for innovation and new companies," he concluded.
Matrix Partners start-up investments include:
- Zong, 30 million customers, mobile payment system used by Facebook and other sites for gaming credits.
- Zendesk, 22 million end users, cloud-based help desk software used by notable clients Groupon, OpenTable and Adobe .
- Polyvore, 6.5 million unique visitors, fashion-based online community aimed at attracting trendsetters and shoppers.
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