
Ask HN: How did Twitter value Periscope at $100M before launching? - AndrewKemendo
Pretty simple question. The acquisition for just under $100M [1] happened before Periscope had a public release, and only a few months after starting conversations with Twitter execs[2].<p>Seems like is has been a reasonable bet given the numbers [3] but seems like a lot for a pre-release product.<p>[1]http:&#x2F;&#x2F;www.wsj.com&#x2F;articles&#x2F;twitter-acquires-live-video-streaming-startup-periscope-1425938498<p>[2]http:&#x2F;&#x2F;techcrunch.com&#x2F;2015&#x2F;03&#x2F;13&#x2F;how-periscope-works&#x2F;#.fhzefvp:TKeD<p>[3]https:&#x2F;&#x2F;medium.com&#x2F;@periscope&#x2F;periscope-by-the-numbers-6b23dc6a1704#.ivtvmsx9n
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KaiserPro
Value is only in the eye of the beholder.

There is no such thing as "inherent value" like taste, its all relative.

For example, $5 for a 1 litre bottle of water sounds expensive right? But if
you're in the desert without any other water supply in range, its a bargain.

Twitter valued it because it convinced it's self it needed it. Its as simple
as that, its the same logic that convinced HP to spunk out however much it was
for autonomy, or News international for myspace.

Maybe they thought it was a good product, maybe they they knew the founders,
maybe they talked a good game about facebook acquiring them. Either way it was
valued that high not because it was a stunning product, but because twitter
thought it needed that company and was prepared to spend 100million on it+.

+Yes that could be construed as cyclical login.

~~~
AndrewKemendo
I don't think that's cynical, I think it's realistic.

I guess what I don't know is, given that, what can we learn from that?

Maybe the lesson is: Be in the right place at the right time with the right
product. Which is too general to really make repeatable.

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Lanari
No one else would value Periscope at $100M other than Twitter, it's just was
the perfect fit for Twitter. The same for Facebook valuing Whatsapp at $20B
after agreeing to not sell ads on it, it was a perfect fit for them for shadow
profiles...

It's the same for individuals, some rich guy would pay millions of dollars for
a piece of art while it's just a piece of crap for another rich guy.

~~~
hayksaakian
would it be in their shareholders interest to pay much more than the market
value of their company?

if nobody else would be willing to pay half as much, isn't someone to blame
for overpaying? are there any consequences for this?

~~~
tyre
That depends on the founders' willingness to sell.

What the market will pay isn't equal to the price at which the owners will
sell. It may have taken a large amount for them to sell at all, with Twitter
being the only one to whom such a price was "worth it."

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phsource
This isn't the first time Twitter has bought a pre-launch company for this
much, and the answer is probably the same way that Twitter managed to value
Vine at $30 million before its launch:
[http://allthingsd.com/20121009/twitter-buys-vine-a-video-
cli...](http://allthingsd.com/20121009/twitter-buys-vine-a-video-clip-company-
that-never-launched/)

For any pre-launch company, this would mean looking at the product, the team
involved (as in acquihires), and the fit with the parent company.

~~~
iamshariq
Looks like Twitter has a good eye and an appetite for risk.

~~~
GFischer
I agree, both Vine and Periscope seem to be good value.

I wondered if they bought many busts for equivalent valuations, fortunately
Wikipedia has a list:

[https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio...](https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Twitter)

And there's a list of companies I haven't heard of, no idea if they were good
buys or not (Gnip, Namo Media and others).

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nthState
My question is simply, how are these people getting recognised pre-launch? Is
it just a case of the connections they have?

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nedwin
yes

~~~
rubicon33
Do you actually know that, or are you just speculating?

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nedwin
I know that.

Edit: I guess this is speculation but I know many, many specific examples of
companies who have had early exits in this range that have come about due to
personal connections. It doesn't take a rocket scientist to connect the dots
here.

Does the average startup outside the bubble have the potential to make these
connections and get similar deals? Maybe. It's a very hard bubble to pierce.
Try to email any "insider" with your early stage, low traction idea and I
suspect you will see a similar result - _crickets_.

~~~
rubicon33
Well I don't disagree that what you're saying is the most likely scenario.
i.e. They knew someone at Twitter.

But just because its the most likely, doesn't mean that's what actually
happened. Hence my question.

~~~
nedwin
Aha. And my reply was less relevant to my personal knowledge of Periscope,
more relevant to other similar acquisitions - including others by Twitter.

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GFischer
This article about how an early investor valued it is a very interesting read
and might give you some insights:

[http://techcrunch.com/2015/10/18/can-the-past-help-a-vc-
pred...](http://techcrunch.com/2015/10/18/can-the-past-help-a-vc-predict-the-
future/)

Also, they were very shrewd with their sales process. I can't recall where I
read it, but they made a private pitch where they got people from all the
major players, so that must have given Twitter pause.

~~~
AndrewKemendo
Great article thanks. I wish more VC did this kind of thing.

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superplussed
The other side of the table had some good negotiators, clearly.

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auganov
Timing is my guess. Maybe Twitter felt like getting the team and the
technology now and then was worth exponentially more than MAYBE having it a
few months down the road.

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bostik
Well, you have to admit it kind of makes sense. Twitter has become too much
about persons turning themselves into brands. It's a logical, if a bit cynical
continuation.

After all, Periscope allows anyone to have a live broadcast show - and
perhaps, just perhaps, to become the pointless celebrities of their own lives.

I know people who are actively doing, or trying to follow someone else's
periscope shows, and it took me a couple of months to realise just _why_ the
entire idea rubs me the wrong way.

~~~
azinman2
It's not like periscope was the only live streaming concept around...

