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Ask HN: How did Twitter value Periscope at $100M before launching?
42 points by AndrewKemendo on Feb 6, 2016 | hide | past | web | favorite | 22 comments
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].

Seems like is has been a reasonable bet given the numbers [3] but seems like a lot for a pre-release product.

[1]http://www.wsj.com/articles/twitter-acquires-live-video-streaming-startup-periscope-1425938498

[2]http://techcrunch.com/2015/03/13/how-periscope-works/#.fhzefvp:TKeD

[3]https://medium.com/@periscope/periscope-by-the-numbers-6b23dc6a1704#.ivtvmsx9n




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.


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.


> its the same logic that convinced HP

Or the Yahoo/Broadcast.com decision, to use the term logic loosely


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.


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?


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."


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...

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.


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


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...

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).


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


From a Business Insider article:

"A few months ago, Kayvon Beykpour met a fellow Stanford University graduate, Jessica Verrilli, for coffee.

Verrilli is the Director of Corporate Development and Strategy for Twitter. She asked what Beykpour had been working on since leaving Blackboard, an education company that had acquired his prior startup, TerriblyClever. Beykpour fired up his iPhone and showed her Periscope."


yes


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


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.


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.


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


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...

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.


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


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


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.


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.


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




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