Groupon’s ballsy decision to tell Google to keep its $6 billion is great for all of us.
1) It’s clear that Internet IPOs 2.0 is going to be upon us. The last big wave (not counting one-off successes like Google (GOOG) and OpenTable (OPEN)) was a decade ago. Now we have Facebook, Twitter, Zynga, Groupon, and countless others that will hit the markets. This will bring the Internet stock sector back to life in a way that we haven’t seen since the 90s and money will flood into the system. Google has now been rejected by Facebook, Twitter, Groupon, Yelp, and others. Next step for these guys, the public markets.
List of companies that could go public by 2013:
- Gilt Groupe
2) Exits for VCs. I want the VCs and angels who invested in these companies to make as much money as possible. More IPOs means higher value, and more varied (i.e. not all Google stock) exits. That money will end up getting recycleyd into the next wave of startups. And successful VCs will continue to raise money (which is always good for future entrepreneurs). Lets not forget its been 10 years since the Internet IPO bubble. Some VCs and their investors are starving for exits. Many VC firms that started in 2000 had 10 year lifespans on their funds. They are done putting money to work and now NEED to exit.
3) More money into internet startups. Not only the VCs and angels mentioned above will put more money into the system but people will see their successes and will want to participate in the next round of successes. Many have argued recently that startup money is getting into bubble territory. My opinion: so what? Its bubbles that ultimately created the innovations of Google, Facebook, etc. Altogether, here’s the new money that will go into startups:
– VCs/Angels that will be recycling money.
– The entrepeneurs who are exiting in the IPOs will now be flush and ready to invest in the next wave of startups.
– The next wave of doctors, lawyers, etc who will want to get into the IPO book and have been out of the investing game since the 90s will now come in. This is the so-called “dumb money” but some or many of them will hit the jackpot with the right investments. All good booms need doctors and lawyers.
Again, there’s been posts all over the place about how the angel scene is heating up, etc and this is no good for the startup world. This is BS. The more money, the better. Yes, good VCs will be squeezed out of deals. But this is not a rare thing. Its a rare VC who provides value anyway. This is not an anti-VC screed. VCs who provide value are immensely useful for a company but the reality is most VCs are not useful and tend to take advantage of entrepreneurs on deal terms that could come back and haunt the entrepreneur. Its best when these VCs feel the heat from so-called “dumb” competition..
4. The hegemony of Google is over. True, Google right now is probably the greatest company ever. But its dominating role as the premier Internet company is coming into question. It blew away the competition (YHOO, IACI, EBAY, AMZN) but basically has failed at developing (or even buying, other than YouTube) any new products that have contributed a significant amount to revenues. But not only is the Google phase over (Facebook surpassing Google in time-spent and twitter/zynga quickly catching up) but once this new crop of companies go public they will have more cash than ever and stock to be able to do acquisitions. The game is about to begin anew in the quest for Internet domination.
5. More exits for entrepreneurs. For the past six years, with the IPO window effectively shut for startups,the main acquirors have been Google, Yahoo, AOL, etc. Its a horrible feeling to have a universe of 3-5 people who can completely decide your future (I went through this when putting Stockpickr.com up for sale in 2007). Now there will be four new avenues available for successful entrepreneurs:
A) more public companies to acquire you
B) IPO route now available again
C) secondary market getting more sophisticated than ever.
D) VCs more ready than ever to partially buyout entrepreneurs because the competition will be heating up so much to invest in startups. Groupon, for instance, was able to say no to Google because, in part, the entrepeneurs pulled some money out in an early $135mm round of financing at a $1bb valuation. This is no-joke money.
There hasn’t been this large a universe of exits since early 2000. And its not fully here yet but will be within 12-18 months.
6) More chances for me-too companies. Groupon has blown away the competition. But the competition will keep getting funding because we now know there are buyers for anyone who is remotely successful in this business model. And the world is big enough to handle the competition. Groupon will continue to grow. But so will their next 10 competitors and money will be available for these me-toos now that VCs know their are exits (Google, Yahoo, AOL, LOCM, etc will all eventually buy Groupon competitors.)
Right now is the best time to be an entrepreneur. Maybe 3 years from now it will be too late but it hasn’t been this good for the startup world since 1997.
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