Valleywag
It's curious that rumors of a Plaxo sale exploded at the same time that Robert Scoble got his Facebook account suspended using a secret, unreleased tool for extracting data from Facebook. Curious, too, that Plaxo is so eager to milk the incident for good PR. While a battle of words takes place in public, we hear that quieter talks are happening behind the scenes: A sale of Plaxo to Facebook. A clash between the companies' backers, though — the powerful VC Michael Moritz and the rising VC star Peter Thiel — could sink any deal.
Technically, the sale makes sense. Plaxo's chief platform architect, Joseph Smarr, is an engineering rock star, with many fans among the Valley's brainiac collectors. And Facebook CEO Mark Zuckerberg is said to admire other members of Plaxo's engineering team. The process of synching multiple address books, Plaxo's specialty, is more complex than it sounds, and would save Facebook some trouble as it tries to become more of a hub for its users' online activities on and off the Facebook site.
Bringing the investors to terms, however, would prove troublesome. Michael Moritz, of Sequoia Capital, is said to be eager to get a stake in Facebook, however small, so it can claim to have had a hand in its success. It's a move he played skillfully in the first bubble when he merged a failing online bank, X.com, into Peter Thiel's PayPal.
Thiel, now a Facebook board member and venture capitalist in his own right, remembers that maneuver all too keenly, and believes Moritz got the better of him in the deal. Then, too, Moritz forced Sean Parker, now a partner in Thiel's Founders Fund, out of Plaxo; he next joined Facebook, and while he didn't stay long, he still owns a substantial stake in the company. Any deal that reunites Sequoia, Thiel, and Parker would produce a moment of boardroom drama the likes of which we haven't seen in a long while.
The talks aren't advanced, and haven't even reached the point of naming numbers. But Facebook's lofty $15 billion valuation gives it a currency for acquisitions. Will Plaxo take Facebook's paper? The decision, if it ever comes to that, will rest in part with Thiel. How delicious it would be to have Moritz at a disadvantage.
Comments
>>But Facebook's lofty $15 billion valuation gives it a currency for acquisitions.
gotta disagree there owen.
when you're PUBLICLY valued for ridiculous prices, then you can go on buying sprees because people are buying your stock for cash.
when you're PRIVATELY valued thru the nose, you can only go on buying sprees for however much cash you have on-hand. which isn't to say that $300M is chump change, but you can only buy 2 or 3 Plaxos, not 10 of them.
dunno about the rest of that soap opera you've got up there, but i gotta think Plaxo is worth more to some big dumb old DinosaurCo who will pay up to figure out social networking & take the 10-30M accounts at face value, rather than Facebook who already knows it inside out & has 150M accounts of their own.
@DaveMcClure500Hats: Nonsense. Private companies can and do use stock for acquisitions all the time. It is a fair question whether the acquired company will accept the acquirer's paper, but it's far from impossible.
my point is there's an inherent discount to deals done with inflated *private* stock... not so with "inflated" public stock, since it's equally convertible to cash.
so that $15B "valuation" isn't the same as a public market cap.
thus, less incentive to do acquisitions *just* for the sake of diversifying revenue, which is arguably what eBay has been doing for the past 3-4 years.
FB has a tougher job convincing would be target acquisitions that its paper is worth $15B until it's either public, or some greater # of fools buy into the current private valuation.
@DaveMcClure500Hats: Whoa, Dave. You just stated that M$FT and the Hong Kong dude are fools for buying into Facebook? Careful with your words, brother. That is if you still want to do business in this town :)
@scalawag: please don't misinterpret my remarks.
i didn't say *they* were the fools, and the 'fool' reference was to the 'Greater Fool theory'... in other words, Ballmer & LKS are betting that *other* people will place an even higher valuation on FB in the future.
to be honest, i think they're probably right. but anyone with a unbiased perspective would have a hard time saying Microsoft wasn't incredibly motivated. not sure what the story was with LKS, but he's been up & down the rollercoaster before.
personally, i think the rational # is probably more like $5-10B at the moment. but give them another year or two of growth & some improved monetization, and they'll be punching thru the $15B number no problem.
(there, good enough to earn me back my 'Silicon Valley Tool' moniker? if not, please come to my conference where i'll be kissing up to multiple social network platform vendors all at the same time ;)
@DaveMcClure500Hats: Yes, I realize that was a slip of the tongue :) Perhaps Owen purposefully baited you by suggesting Facebook's private valuation could give it a currency?
Even if I do make it to San Diego, do not expect me to be introduced by my VW identity. I am just one politically incorrect ScalaWag who can go without extra attention - refer to my prior comment.
Finally, I agree with all your points on valuations.
I'd heard a comcast acquisition of Plaxo was all but done -- that these discussions have been going on for months.
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