How quickly can you get to a billion?

So it’s official. Google has bought YouTube for $1.65bn. 

And the question is–how much quicker is it getting to reach $1bn in value to a buyer?

Just looking at private Internet companies, it took Geocities several years before Yahoo acquired it for $1bn or so in 1999. 

Skype was founded in 2002, launched a beta in Aug 2003 and was acquired by Ebay in September 2005, say at three years age for $2.6bn in cash and stock with a $1.5bn earn out. By employees, I think Skype had 200 odd at the time of acquisition.

YouTube was founded in Feb 2005, launched in Sep 2005 and a year later (or so) was acquired by Google for $1.65bn. YouTube’s initial investor was Sequioa, $3.5m in November 2005. By employees YouTube had 67 according to press releases.

Without knowing the details, I guess Sequoia is going to make upwards of $400m on the deal (assuming they hold a magical 25%–they may hold much more)–which isn’t bad for a year’s work. Bonus time in Sand Hill Road!

In other words, it’s getting quicker and quicker to get a billion. I heard Danny Rimer say this at an event a few weeks back referring to Skype. It seemed not implausible, but well, a stretch. He was right.

The magical combo of already having an audience online, having eliminated boring operational hassles like how do I scale past a million users, how much will my database licenses cost and so on, means you can test and prove a proposition really quickly. It’s something that ordinary firms (pre-Internet) struggle with.

But the deal raises all sorts of other interesting questions:

  • Just how innovative is Google’s engineering talent? AdSense is powered by Oingo (an acquisition), Google  Earth by Keyhole, Analytics by Urchin (all acquisitions). The same week Google “put a lid on new products“, we see an acquisition in favour of organic growth. (Clearly a sensible, non-dogmatic approach for the firm but puts into perspective their ability to regularly generate innovation and take it to market.)
  • Upe joked if there were any news companies worth $1.65bn. Well there are but for a $6bn UK firm like ITV or newspaper groups in the US, finding $1.65bn to buy an early stage venture will be a real stretch.

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One Comment

  1. Posted October 10, 2006 at 5:33 am | Permalink

    I like the ‘how quick to a billion’ idea.

    Of course the YouTube boys were also part of the $.15Bn PayPal team too!

    BTW – Sequoia put in two rounds $3.5, then $8m. Detailed here – http://digital-lifestyles.info/display_page.asp?section=business&id=3756


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