Thiel could reap $1.4B from Facebook IPO

Matt Bowman · March 5, 2010 · Short URL:

Facebook's angel investors stand to make a pretty penny when the company goes public.

In light of Facebook’s eventual IPO plans and the valuations being thrown around by analysts, I asked our friend Lorenzo Carver at Liquid Scenarios to run some estimates on how Facebook’s investors might make out if the company IPOs next year.

First of all, Carver notes that the $30 to $40 billion market cap that the Wall Street Journal’s sources estimated is a lot higher than veteran financial analyst Michael Moe's "more reasonable" estimates. In November, Moe's firm, Next Up Research, pegged the company at $5.07 to $6.5 billion. “To justify the higher numbers using standard valuation metrics, Facebook needs to have triple digit revenue growth for each of the next 5 years or achieve some astonishing EBITDA margins,” Carver says.

Assuming a value somewhere between Moe's and the WSJ's estimates, the initial angel investors, Peter Thiel and Reid Hoffman, would stand to make a pretty penny if the company IPOs next year. Assuming they were 50/50 on the initial $500 k angel investment, they could expect $700 million each if the company IPOd at $20 billion, and just under $1.4 billion if it made it to the higher $40 billion value.

Russian firm DST, which only invested in May of last year, would be looking at a 4.5X return at a $20 billion valuation (assuming they were able to buy the $100 million worth of options they sought in the buy-back deal from shareholders). That's not bad for a two-year old investment.

Below are some charts for financial junkies

Source: Liquid Scenarios Search2Model preliminary estimates.





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Liquid Scenarios


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Since founding bpCentral, our focus has been on increasing each user's competitive advantage each and every time they interact with one of our applications.  Naturally, this involves more than simply enabling complex calculations to be performed accurately.  In fact, during the first 12 months of developing our new technologies and applications, we put an inordinate amount of resources into discovering how to transform the relationships between idiosyncratic decision-makers and financial information.  Our premise was that if that human to data relationship could be elevated to a new standard, then the relationships of those professionals with the entities and individuals they interact with could be more efficient and therefore more valuable. 

In response, we developed CIMPA, the Carver Import Algorithm, a system that allows any electronic financial information, data or reports to be interpreted by a receiving system without the need for XML, XBRL, tagging approaches or extensive manual data entry.  As a result of this technology, the Company's systems for private equity and venture capital professionals are able to import data in a matter of seconds, instead of a matter of hours. 

Similarly, the Company noted that when users attempted to calculate the outcomes of complex liquidation preferences, anti-dilution provisions and other complex terms that are common to VC/PE transactions, any output was virtually impossible to verify without a costly audit of the formulas.  Since the formulas were generally based in excel, this meant that few if any partners or other key investment professionals could afford to expend the effort to verify how amounts were arrived at.  Upon further consideration, the Company realized that, to a certain extent, this was true of all financial reports.  For traditional financial statements, this point is evidenced in the fact that notes to financial statements typically occupy several times more pages than the actual financial reports do.  This realization inspired the Company to develop a system it calls OferX, which presents all financial information in a manner that allows any user to audit and see how amounts were calculated (in an easy to understand, quantifiable manner) without the need for extensive textual descriptions.

Together these unique tools form the foundation for the Company's offerings, which are backed by over 29 patent pending technologies.


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Managing Partner, Founders Fund

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