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The Details Behind Amazon’s Valuation of Zappos

Cold hard facts make it much easier to understand Amazon’s acquisition of Zappos. Amazon’s recently filed S-4 provided a ton of fact based insight into the Zappos deal. This post helps you navigate through some of the more interesting sections of the document including the timeline of Zappos’ discussions with Amazon (hint 478 days between the start and end), the key factors that were used to value the Zappos business, the size of the now famous liquidation preference shared by Sequoia, Venture Frogs, and select executives (another hint – it was about $181 million), and copies of Zappos’ financial statements for 2007, 2008, and Q1 2009 (final hint – they were pretty good after all). Finally, there’s a roundup of a few other posts about the Zappos deal that provides some very insightful commentary.

Did You Know Mafia Wars & Zynga Are Generating >$200 Million a Year?

It was certainly news to me. It looks like Zynga is one of the first companies aside from Facebook and MySpace that have successfully monetized the social media market place. TechCrunch’s Sarah Lacy has written an excellent post about a potentially serious threat to Zynga and any other provider of ‘virtual goods’ that get exchanged in sanctioned or unsanctioned secondary markets. Click through to learn more about Zynga’s background, the serious threat that Sarah Lacy uncovered via an anonymous source from one of Zynga’s competitors, and how the Senate’s discussion today about imposing a 10% excise tax on plastic surgery might lead to the taxation of virtual goods.

Why Don’t Fortune 100 CEOs Care About Social Media?

It is simply irrelevant to them and there’s no upside. ÜBERCEO posted a couple of presentations on Slideshare that I admit I was link-baited into reading. The presentations do a good job of documenting the lack of presence Fortune 100 CEOs have on Twitter, LinkedIn, Facebook and Wikipedia. The pitches then exhort those CEOs to take advantage of the opportunities they are missing. What the authors failed to understand is that there is practically no incremental benefit and a lot of downside for a Fortune 100 CEO to engage in social media. The opportunity costs are simply too great. Two minutes to draft a witty tweet could cost a typical Fortune 10 CEO $2,800 in ‘revenue opportunity’. The impact of social media, however, for a more typical sized company between $100 million and $1 billion is a different story. The full ÜBERCEO presentations are embedded in the post, along with a few fun stats about the Fortune 100 CEOs as well as a summary of how Tony Hsieh’s Zappos grew revenues by over $140 million last year by using social media as one, of several, innovative strategies.

[ More ] July 19th, 2009 | 1 Comment | Posted in Management, Product Management, Social Media |

StartupBD

Did you ever wish you could leverage the BD experience of Half.com, eBay, or del.icio.us? Chris Fralic, a partner at First Round Capital gave a presentation at the recent DreamitVentures conference where he shared what’s worked and didn’t work during his 25 year tenure at these firms and others as well. Check out the full presentation inside the post.

[ More ] July 17th, 2009 | No Comments | Posted in Product Management, Venture Capital |

“Free:The Future of a Radical Price” or Irrational Exuberance?

“Free: The Future of a Radical Price” or Irrational Exuberance? Can you really build a valuable tech business where a core component of your strategy is to give away a significant part of your product or service for free? Chris Anderson’s new book “Free: The Future of a Radical Price” asserts that “People are making lots of money charging nothing. Not nothing for everything, but nothing for enough that we have essentially created an economy as big as a good-sized country around the price of $0.00.” This post synthesizes together a couple of excellent reviews of Anderson’s book from The New Yorker and the New York Times and combines it with my views about what it takes to build a valuable tech company today. While Anderson’s theory is interesting, it smacks of a lot of the same logic that was used to justify the Dot Com Bubble. There’s also an interesting postscript in which a writer for The Virginia Quarterly Review points out that apparently Anderson plagiarized several passages in the book from Wikipedia. The postscript contains Anderson’s explanation (citations were accidently left out during the last minute editing rush) along with his and his publisher’s plans to rectify the oversights.

Andreessen-Horowitz Core Principles & 5 Other Things Marc Said

What’s the thinking behind Marc’s latest $300M idea? Last Sunday Marc Andreessen and his long time partner Ben Horowitz launched a new venture capital firm aptly named Andreessen-Horowitz. Marc summarized his feelings about the current venture capital world in the following quote “The problem is that there aren’t valuable companies being formed. And there never have been,” Andreessen continues. There are, he says, on average 15 tech companies launched a year that will ultimately do $100 million a year in revenues, and these companies are responsible for 97 percent of the returns in the venture industry overall. “There just aren’t that many great founders.” Andreessen-Horowitz and their initial $300 million fund are designed to address this problem.

As part of the rollout both Marc and Ben did a number of media events. From those events we have assembled some interesting information – including the eight core principles of the new Andreessen-Horowitz firm, the role he and Ben plan on taking with the firm and their investments, as well as what they are specifically looking for in entrepreneurs and potential investments. Additionally, there were five additional comments Marc made in an interview with TechCrunch’s Sarah Lacy that provide some deep insight into his opinions about Twitter, Digg, Sarbanes-Oxley, and how many VC’s will go out of business in the next 5 to 10 years.


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