Why Investors Think Pinterest Will Easily Be Worth $5 Billion


Photo: madaise via Flickr

Pinterest was founded two years ago.Now VCs say they’d invest at a $1 billion valuation if Pinterest were to raise a new round. It raised $27 million at a $200 million valuation last October.

That means they think Pinterest will be worth anywhere between $3 and $10 billion. (Nobody invests to make zero return. They invest to make a 3-10X return, thus investing at a $1 billion valuation means they think it’ll be worth $3-$10 billion.)

Here’s their logic, as explained by an investor who would happily write Pinterest a massive check.

  • Investors think Pinterest could be the next Facebook. They see it as an entirely new platform, especially for e-commerce and advertisers. It drove more traffic to sites in February than Twitter, YouTube, LinkedIn and Google+ combined.
  • Growth isn’t slowing. It generated 17.8 million unique visitors last month, a 52% increase over the month prior.
  • The path to monetization is clear. “It’s so commerce and goods driven,” says one investor.  He/she acknowledged that pictures of cupcakes and sunsets are hard to monetise, but says many of the photos come directly from stores like Pottery Barn. Even taking a cut of referral traffic could yield significant revenue. Pinterest recently hired Tim Kendall, Facebook’s former director of monetization, to help it figure out a game plan.
  • Copyright is a non-issue.  Investors think Pinterest is a strong enough company that it will figure out any legal issues it faces.

Crazy? Maybe. But some people think Pinterest is already worth as much as $2 billion.

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