A picture is worth $1 billion (if you’re Instagram)

BVWireIssue #115-3
April 18, 2012

In just four “simple charts,” the market research analysts at Business Insider (BI) purport to show you (and those who question Facebook’s acquisition last week) why Instagram is “clearly worth” its $1 billion price tag. The first graph gives a snapshot of Instagram’s capital efficiency, comparing its estimated growth in employees to its predicted “tens of millions of users.” The next three plot the future of global Internet access, device sales, and mobile app revenues. The bottom line: “Instagram is the future of startups” and the “future of mobile social networking,” says the BI post. “To us, $1 billion sounds cheap.”

Is that really how you reliably value startups? On April 26, join Mike Pellegrino for Valuing Early Stage Companies and a discussion of the truly difficult aspects of appraising startup companies and new ventures, including intangible asset valuation, treatment of small revenue streams, and how to assess unproven business plans, new product concepts, and management growth forecasts.

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