Notes from the Facebook S-1 IPO Filing

The eagerly anticipated Facebook S-1 IPO filing is finally available on the SEC’s website. Facebook represents the once-a-decade company that truly changes the world (think Google as another one). The Facebook IPO filing, unlike some of the other companies to go public in the last couple quarters, gets so much attention that the most interesting facts have already been shared. I’ll try to share those items along with some less common items that are still very interesting.

Here are notes from the Facebook S-1 IPO filing:

• Mission: make the world more open and connected (pg. 1)
• More than 800 million monthly active users (pg. 1)
• More than 425 million mobile monthly active users (pg. 1)
• 2.7 billion Likes and Comments per day (pg. 1)
• CEO has control over key decision making as a result of his control of a majority of our voting stock (pg. 5)
• Revenue (pg. 4):
  2009: $777M
  2010: $1,974M
  2011: $3,711M
• Net income (pg. 4):
  2009: $229M
  2010: $606M
  2011: $1B
• Advertising represents 85% of revenue (pg. 12)
• Facebook has been or is currently restricted in whole or in part in China, Iran, North Korea, and Syria (pg. 15)
• Culture emphasizes rapid innovation and prioritizes user engagement over short-term financial results (pg. 16)
• Zynga accounted for approximately 12% of revenue (pg. 18)
• If Mr. Zuckerberg controls the company at the time of his death, control may be transferred to a person or entity that he designates as his successor (pg. 21)
• 3,200 employees (pg. 23)
• More money is spent on marketing and sales than research and development showing that most of their ad sales aren’t done via a self-service model (pg. 40)
• Early revenue (pg. 43)
  Year 1 – $382,000
  Year 2 – $9M
  Year 3 – $48M
• $2.4 billion in restricted stock unit expense that hasn’t been charged yet (pg. 48)
• Unsecured $2.5 billion line of credit that’s unused (pg. 57)
• Television, print, and radio accounted for $363 billion, or 62% of the total advertising market in 2010 (pg. 78)
• From 2010 to 2015, the worldwide online advertising market is projected to increase from $68 billion to $120 billion (pg. 78)
• Facebook stores more than 100 petabytes (100 quadrillion bytes) of photos and videos (pg. 90)
• Facebook.com is largely written in PHP (pg. 90)

Overall, the Facebook S-1 IPO filing is straightforward and detailed. The revenue and profit growth of Facebook over the past eight years is astounding. For potential investors. the fact that Mark Zuckerberg single-handedly controls the company makes for an unusual situation. Facebook deserves to be in the 10x revenue club.

What else? What are your thoughts on the Facebook S-1 IPO filing?

Startups Should Default to Laptops for Employees

Three years ago we started defaulting laptops for employees in place of desktops and we’ve never looked back. Laptops are so cheap, portable, and powerful that there are few reasons not to use them. When a laptop, especially a MacBook Air, is paired with a nice monitor (at least 24″) you have the ultimate modern workstation. Yes, some hard core CPU-intensive applications and games are better for high-end desktops but those are few and far between.

Here are a few items to keep in mind when you go to a company-wide laptop plan:

• Conference room laptops should be locked down because inevitably people will forget their laptops at home and borrow it without telling anyone
• Extra laptops and laptop chargers should be ordered and managed by someone in the event an employee forgets theirs at home
• Theft of laptops will occur when an employee forgets about it in their car, so be prepared with remote-wipe software and require a password upon machine start
• Ensure that laptops during meetings are used for notes and not email (do the lunch check: if someone calls someone out for checking email during the meeting and they are right, the person checking email buys the other person lunch and vice versa if they’re wrong)

Laptops for all employees has worked great for us and I highly recommend it.

What else? What are your thoughts on startups defaulting to laptops for employees?

Why VCs Won’t Like Fred Wilson’s Valuation Posts

Image by Lachlan Hardy via Flickr

Fred Wilson has a rich history of bringing more transparency and understanding to the venture capital world, including the dynamic with entrepreneurs, via is popular blog avc.com. Recently, there have been two especially interesting posts:

• Pricing a Follow-On Venture Investment
• Determining Valuation Multiples

Valuations for startups, other than outliers published on TechCrunch (see Dropbox’s $4 billion valuation on $30 million in revenue), are often a closely guarded secret. One of the big advantages for traditional VCs is the opaque nature of information and the frequency of negotiating deals. Think about it: a VC might negotiate a couple deals per year while a successful entrepreneur might negotiate a few deals in a lifetime. The more information that becomes available results in a more efficient market for VCs and entrepreneurs. While VCs will always have an advantage the dynamic is much more less heavily favored for them than previously.

VCs won’t like Fred Wilson’s valuation posts because they present examples of high valuations and low VC ownership positions. Entrepreneurs, when they read the posts, are naturally going to think those valuations are representative of their startups. Note that Fred uses terms like category leaders, of which most startups aren’t.

Also, when he talks about investing $3 million at a $30 million post-money valuation, implying a 10% ownership stake, that’s not a high enough stake for most VCs to get out of bed, unless the startup is at a very late stage. Entrepreneurs expecting these valuations and VC ownership positions are going to be very disappointed. And, VCs aren’t going to like having to deal with the push-back and convincing that these aren’t normal.

I like VCs and think they are an important part of the eco-system, but I’m sure these posts are going to cause headaches for VCs and entrepreneurs alike.

What else? What do you think of Fred Wilson’s valuation posts?

Every Startup CEO Should Learn to Write Code

Image via Wikipedia

When I first started out in December of 2000 my goal was to build a Software-as-a-Service (SaaS) content management system for small businesses (see Iterate or Die). I had been building simple HTML (CSS wasn’t even part of the equation then) sites for three years but didn’t know how to write code. At the time, I enlisted some classmates of mine to be summer interns to build out the product for $10/hour. The thinking was that I could just focus on product management and sales.

Well, at the end of the summer I quickly ran out of money. Only having a couple customers that paid $30/month wasn’t enough to fund much software development even if it was relatively cheap at the time. Not knowing any better I picked up a teach yourself PHP book and jumped in head-first to writing code. It was one of the best moves I ever made.

Every startup CEO should learn to write code.

Here are some benefits of startup CEOs learning how to code:

• You understand the technical architecture and trade-offs of different product decisions
• You can call B.S. if a technical person pushes back on something being too difficult/time consuming
• You become a much better manager of other technical people
• You never run out of things to do (believe it or not I’ve had non-technical co-founders come to me saying there’s nothing for them to do as they are waiting for the programmers to finish something up)
• You can better communicate with prospects and clients as you’re not dependent on a sales engineer

Startup CEOs should learn to write code and become a better leader. Programming, much like finance or logic puzzles, is easy to pick up with some effort and patience. The goal isn’t to become a full-time programmer but rather to be a stronger part of the team.

What else? What are your thoughts on startup CEOs learning to write code?

Business Idea: iPhone App to Make Driving a Game

Image via Wikipedia

Earlier today I was driving to my ALTA tennis match and enjoying the beautiful day. On Roswell Road heading towards Chastain Park, I was merging into the turn lane and found myself splitting two reflectors in the road due to vering a bit too early. The precision with which I spaced the reflectors on either side of my front left tire put a smile on my face and an idea popped into my head: there needs to be an iPhone app to make driving a game.

I’m sure someone else has already thought about it and that an app already exists (I haven’t checked yet) but here are some thoughts as to how it would work:

• Use the GPS and accelerometer to measure the car’s location and motion
• Develop tracks or routes like “Lenox Mall to Piedmont Park” or “GA 400 Exit 1 to Harvest on Main in Blue Ridge, GA) and have leader boards based on route time, average speed, lateral Gs pulled, and more
• Award badges and bonus points for items like the fastest speed through turn two, night owl for doing the route after midnight, etc
• Be able to put in your type of car for a handicap (e.g. a Ford Explorer would get an adjustment compared to an Audi R8)
• Allow for custom routes like recording your daily commute for more badge types and categories (longest commute, most variable commute, most turns in a commute, etc)

Yes, there are some public safety concerns with people driving too fast in attempt to set a personal best or top the leader board but I don’t think it’s anything crazier than people already on the road.

Driving is fun. An iPhone app with a community makes it even more fun.

What do you think of the idea? Will it work?