Prophecies from the Facebook IPO

I’m starting to believe that since Facebook announced its IPO, every news article coming out of the Valley has been related to the semi-disaster. Let’s take Paul Graham, cofounder of Y Combinator, for example, and his claim that the bad IPO will have an impact on the funding given to early stage startups. He warns these companies to lower their expectations for investment money and encourages companies who have raised money to spend wisely, or not spend at all.

I understand that Facebook may seem like a good argument for this sort of statement, but I think this should have already been obvious to startups. The decline of Facebook’s IPO proves that tech companies may be asking for too much. Despite its decline, the company is still valued at $57.5 billion, according to Google Finance. The result was merely an overvaluation that feel back into equilibrium. It’s almost a reiteration of what should already be apparent.

The only case I can see for Graham’s argument is the fact that Groupon’s stock plummeted 26% in the past week, a case that hasn’t been uncommon for other tech firms since the Facebook IPO. If Graham is wrong about startup funding, I believe he has a case for public tech firm doom. Are companies like social media or a daily deals site meant to last long enough to go public successfully? We’ll know soon enough.

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