WHATSAPP’S CLOUT AND ESTONIA’S CLOUD: Here’s The Best VC Wisdom Of The Week

 
 
 

It’s been a hot minute since our last collection of VC wisdom…buckle up for some serious mind-warps:

Facebook Massively Overpaid for WhatsApp,” by Albert Wenger of Union Square Ventures:  “All the arguments being made about Facebook simply using its highly (over?) valued stock to buy a business don’t add up. If you buy something with sustainable revenue streams, then great and you should do that all day long (especially if your revenue / earnings multiple is higher than the target’s). But shelling out a lot of money for something that you will (likely) make free and on top of it paying close to or possibly above your own revenue multiple makes no sense. Neither does the argument that they were taking out a threat. How many times can you take out a threat at 10% of your market cap? And why would you pay that much to eliminate a threat, when you have a credible ‘build’ alternative?”

Why the WhatsApp Acquisition Changes Everything,” by Tomasz Tunguz of Redpoint Ventures: “From zero to $19B of business value in five years; WhatsApp’s sale to Facebook is an important moment in the history of the consumer web. The deal proves distribution, reach and large user bases aren’t the competitive moats they once were. Apple’s App Store and Google Play have leveled the playing field to such an extent that a startup can command 10% of the market cap from a $200B company.”

“The Carrot and Stick,” by Charlie O’Donnell of Brooklyn Bridge Ventures: “Technology is moving faster, markets are changing more quickly and uncertainty seems to be increasing. In my mind, that creates the opportunity for increasing returns.  New markets are available.  We’re doing things in personal health, mobile, and physical products that we never could have done ten years ago.  TVs are changing.  Finance is changing. Risk, over the long term, is going to be rewarded, but there are no sure bets.  Let’s remember that, people.”

Estonia: The Little Country That Cloud,” by Ben Horowitz of Andreessen Horowitz: “Even more interestingly, there is a flip-side to the fully digitized nature of Republic of Estonia: taken to the max, having the bureaucratic machine of a country humming in the cloud increases the cost of any potential physical assault to the state. Imagine if physical invasion of this piece of Nordic land by anyone would not stop the government operating, but booted up a backup replica of the digital state hosted in some other friendly European territory. Democratic government would be quickly re-elected, important decisions made, documents issued, business & property records maintained, births and deaths registered and even taxes flowed by those citizens still with access to the internet. May sound futuristic, but this is exactly the kind of world Estonia’s energetic CIO Taavi Kotka can not just dream up but actually implement, on the e-foundations the country already has today.”

What Comes Next,” by Fred Wilson of Union Square Ventures: “I wake up most mornings thinking ‘what comes next?’. That is the business we are in. We’ve gotten it more or less right on social networking, mobile, crowdfunding, and maybe bitcoin. But, as Nick [Denton] points out, these are not the ‘next things.’ These are just the ongoing evolution of the Internet and all that it opens up in terms of innovation. And Nick goes on to suggest that the way our society will solve cancer, space travel, and environmental issues is ‘intelligence connected to human beings.’ Collective intelligence at work. That’s a big assertion but he may well be right.”