“There is no higher God in Silicon Valley than growth. No sacrifice too big for its craving altar. As long as you keep your curve exponential, all your sins will be forgotten at the exit.” -David Heinemeier Hansson
Snap Inc. went public last week. Offering price was $17. Closing price on the first day was $24.48. Given that the company is not profitable and may never be profitable (their caveat, not mine), many people have been asking: Is a valuation somewhere around $34 billion justifiable?
This is a common question when it comes to tech companies. And the answer usually comes down to something along the lines of this:
The Snapchat story “is all about growth,” Mr. Nathanson said. “It’s not about economics.”
It’s about the future.
I love Snapchat and I think the company is run by a very creative founder. But now that Snapchat Stories was stolen by Instagram, they need, in my humble opinion, something new and killer to stick.
How else will they meet their growth targets?
On a related note, I recommend you read a piece by David Heinemeier Hansson called: Exponential growth devours and corrupts. That’s where the quote at the top of this post is from.
Here is an excerpt:
What sucker wants to earn $10 million/year at a 52.5% tax rate when you can get away with hundreds of millions in one take at just 15%? Nobody, that’s who.
It’s hard to argue that boards, founders, and their financiers aren’t just doing exactly what the incentives are coaxing them to do.
Which is why growth is now everything and residual value is nothing. In fact, the latter can be outright harmful to the former. When you’re being priced on the hopes and dreams of potential, reality can be a dangerous and undesired competitor. Best just to appeal to the exponential curve and let the imagination roam free. An epic capital gains score awaits!
I am testing out Spectacles by Snap Inc. right now:
They were incredibly easy to sync with my phone (just look at your Snapcode while wearing them). And the case itself charges the glasses when you put them away. Pretty slick.
I also started using Instagram Stories for the first time. I had been boycotting it because it was such a direct copy of Snapchat Stories, but at the end of the day, the audience is there and lots of people are using it. I capitulated.
It’s somewhat disconcerting how quickly a product feature can be copied that immediately pulls users away. Or maybe that’s just business. I mean, if I’m already using Instagram, why not just post my ephemeral stories here, right?
That’s why it’s so important to keep trying new things. And that’s why I think Spectacles are an important product for a company that has just filed to go public. They keep you in the moment while you share.
I’ll report back once I’ve had more time to experiment with Spectacles. But already I can tell you this: they are fun.
This is what it looks like in Mont-Tremblant right now:
It’s currently -11 degrees celsius and it’s expected to snow for most of the day. It’s starting to come down right now. But this evening it’s supposed to warm up to +1 degrees celsius, which means it may turn into (freezing) rain. I hope we see a lot more snow than rain. Nobody wants an icy mountain.
If you’re looking for things to read this morning, here are 3 pieces:
1. In American Towns, Private Profits From Public Works. It’s a NY Times article talking about how cash-strapped towns are turning to private equity firms to pay for their infrastructure.
2. How Zoning Laws Shaped New York City Over the Last Century. This is about an exhibition being held at The Museum of the City of New York right now. The rules we make shape our built environment. Thanks John for the link.
3. Authenticity, and how Snapchat is banking on it. I am very fascinated by Snap Inc.’s ability to think differently and adopt counterintuitive business strategies. There’s also a cultural dimension to all of this.