Tech Companies Are Learning The Exact Wrong Lesson From The Facebook IPO

EvernoteEvernote CEO Phil Libin

Photo: Boonsri Dickinson

Bloomberg just reported that Evernote will hold off its IPO until at least 2015.The reason? Facebook’s disaster.

Yesterday, Fox Business News’s Charlie Gasparino reported that Twitter will also delay its IPO for longer than it had been planning.

The reason? Facebook’s disaster.

This is not good.

It seems that fast-growing tech startups are learning the exact wrong lesson from the Facebook IPO.

The reason Facebook has had a lousy run in the first few months after its IPO is that its business is past its initial, wild growth stage.  This was obvious back then.

Its revenue growth is decelerating more than a newly public company should. It went public at too mature of a stage.

Facebook’s public debut was hurt by its long delay in another way, too.

Staying private limited supply to its equity, even while demand soared. This created an inflated sense of Facebook’s value.

The company’s valuation reach as much as $150 billion on secondary markets. This created a fevered atmosphere around the IPO, making it very hard for the company not to disappoint. 

Facebook didn’t IPO too soon, it IPO’d too late. Evernote and Twitter should not make the same mistake.

They should go public soon, while their businesses are growing the way LinkedIn is growing right now: fast, on a revenue base larger than $100 million per year.

For Evernote, which will have revenues of about $50 million this year, next year or 2014 might be the right time.

For Twitter, which had $140 million revenues in 2011 and expects to reach $1 billion by 2014, now is the time.

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