It has until the end of April next year to either make the necessary filings
or IPO. Analysts have predicted that Facebook could set its valuation at
$100bn when it floats and break new ground as the biggest consumer
technology public offering ever.
Hoffman, who, as the co-founder and now executive chairman of LinkedIn,
recently
enjoyed a successful float of the business networking company he created in
2003, agreed that Facebook’s IPO could set new records.
“It could be the largest ever consumer technology IPO,” he said. “Facebook has
deferred for a long time. The pattern 10 years ago was to go out [float] as
soon as you could. The pattern now is to build a lot of inertia in your
business and Facebook has done that. This will lead to a high tension IPO
with a robust valuation.”
Facebook declined to comment.
Recent billion dollar valuations of several consumer web companies
has
led to claims that there is a new technology bubble just waiting to burst.
Floated on the New York Stock Exchange on May 19, LinkedIn epitomised the
recent technology bubble, with its shares rising more than 109pc to close at
$94.25 on the first day of trading, having gone up as much as 171pc at one
point earlier in the day.
In less than 24 hours, a company with relatively small profits – it reported
profit after tax of $6.59m (£4.04m) for the six months to June – went from
being valued at $4.25bn to in excess of $9bn.
Hoffman, who is also now a partner at leading Silicon Valley venture capital
firm Greylock Partners, refused to say whether he believed that the industry
was back in a bubble. “I leave answering that specific question to other
people. The precise point of a public market is that the market dictates the
current answer to that question. Right now people who claim the technology
market is back in a bubble are those who believe investors are underwriting
the risk relative to growth.
“I invest in, and will continue to do so, in networks, platforms and
marketplaces. The current ones will deepen and new ones will add value -so I
am bullish about the growth opportunities in the market right now.”
He also said that the recent trend for secondary private markets to grow up
around companies such as Facebook would have to “morph” and change in
response to concerns from US regulators.
“The secondary market is a complicating factor in all of these businesses,”
Hoffman said. “My guess is that how the secondary markets work today is not
how they will work in a couple of years. How they will work is to be
determined.
“The challenging thing about them is that private companies usually like to
control their shareholders and as these markets have grown to be so big,
almost seeming like a quasi real public market, it is more difficult to keep
a handle on. Plus there are increasing regulatory issues.”
Hoffman has been in the UK for the last week as part of an initiative he set
up several years ago with fellow investor, Sherry Coutu, called ‘Silicon
Valley comes to the UK’.
The
pair
felt that young British people needed inspiration and the confidence to
strike out on their own – hence the focus on panel discussions and
events at 30 universities across the country during the last week, reaching
around 12,000 students. And for the first time, there were entrepreneurial
sessions going on at two Cambridge schools.
This year’s 30-strong troupe of Silicon Valley delegates include Andrew
McLaughlin, the former chief technology officer for US President Barack
Obama, and Megan Smith, the head of acquisitions at Google.
There was also a
reception
at Downing Street where the 32 student winners of an ‘Appathon’
[a competition last month during which 850 students had 48 hours to come
up with the best mobile and web apps using Government data] were announced
by David Cameron. These students will now tour Silicon Valley.
Hoffman says he has been impressed by the lack of barriers there are to
creating a start up in the UK, but he feels the Government could do more to
create programmes and events which encouraged valuable networking amongst
technology entrepreneurs.
He thinks
that
fear of failure is the principal cultural challenge the UK needs to overcome
if more people are to become entrepreneurs.
Interestingly, Hoffman also revealed that he is not sure if LinkedIn would
have taken off in the same way it did had he founded it in the UK in 2003
instead of the US.
“For all social networks, part of getting them started is having enough people
who are willing to experiment with another extension of their personal
identity,” he explained.
“So in a LinkedIn sense it’s your professional identity; in a Facebook sense
it’s your social identity and Twitter - your media identity.
“What I don’t know is would there have been a slower adoption within those new
expressions of identity here had the likes of LinkedIn not been established
elsewhere first, because of that classic British fear of embarrassment.”
Looking ahead, Hoffman believes the next wave of the internet, ‘Web 3.0’,
moving on from the information and social web, will be one dominated by data.
“Data is the next powerful underlying theme of Web 3.0. This growing amount of
data, which is all semantically indexed, will generate the next set of apps
by which we will better navigate the world. Those apps will be the next big
set of tech players.”
