CHICAGO—September 24, 2009—37signals is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1.
Founder Jason Fried informed his employees about the new deal at a recent company-wide meeting. The financing round was led by Yardstick Capital and Institutionalized Venture Partners.
In order to increase the value of the company, 37signals has decided to stop generating revenues. “When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation,” said Mr. Fried. “Once you have profits, it’s impossible to just make stuff up. That’s why we’re switching to a ‘freeconomics’ model. We’ll give away everything for free and let the market speculate about how much money we could make if we wanted to make money. That way, the sky’s the limit!”
Proof that 37signals is now a $100 billion dollar company.
A $100 billion value for 37signals is “not outlandish,” says Aanandamayee Bhatnagar, a finance professor and valuation guru at Grenada State’s Schnook School of Business. Bhatnagar points to a leaked, confidential corporate strategy plan that projects 37signals will attract twelve billion users by the end of 2013.
How will the company overcome the fact that there are only 6.8 billion people alive today? “Why limit users to people?” said Bhatnagar.
In order to determine the valuation of companies, Bhatnagar typically applies the following formula: [(Twitter followers x Facebook fans) + (# of employees x 1000)] x (RSS subscribers + daily page views) + (monthly burn rate x Google’s stock price)2 and then doubles if it they use Ruby on Rails or if the CEO has run a business into the ground before. Bhatnagar admits the math is mostly a guess but points out that “the press eats it up.”
To help handle the burdens of an increased valuation, 37signals hired former YouTube exec Craig Mirage as Chief Operating Officer earlier this month. Mirage hopes to replicate YouTube’s valuation success at 37signals. “Of course, the investment comes with great expectations. But you should see the spreadsheet models we’re making up. Really breakthrough stuff,” said Mirage.
“37signals will lead the new global movement filled with imaginary assumptions on growth and monetization potential,” he continued. “We’re excited to roll out a list of unconfirmed revenue possibilities that involve crowdsourcing, a robust set of widget creation tools, 3G, augmented reality, social stuff, and an app store. Also, everything we make will include a compass.”
Paul Stamatiou
on 24 Sep 09Aww, shoulda waited to post this on April 1st!
Luke P
on 24 Sep 09Awesome, had me going with that headline.
Andy
on 24 Sep 09Well played.
Brennan Dunn
on 24 Sep 09Jason, Michael Arrington just called and wants to hire you!
Ryan Merrill
on 24 Sep 09When’s the IPO go on sale?
Great satire, Jason.
Kyle Fox
on 24 Sep 09This synergy is getting me all hot and bothered!
Ankush Narula
on 24 Sep 09haha – good one!
Angel
on 24 Sep 09ROFL!
Farhan Rehman
on 24 Sep 09Hehehehe – hilarious stuff – does this mean all the products are now going to become free, have the word ‘beta’ and Web 2.0 attached to them, and then start becoming the latest tools in ‘Social Media’ or ‘Social Networking’ for the Enterprise and SME sector? ;)
Agustin Cuenca
on 24 Sep 09I can give 100% ROI in 24 hours. I’ll buy their share for 2 US$.
Jeff Mackey
on 24 Sep 09“Pickin’ up the sarcasm.”
“That’s good, ‘cause I’m layin’ it on pretty thick.”
FredS
on 24 Sep 09Gold!
Patrick Algrim
on 24 Sep 09Just glad you finally came to your senses about putting a compass on everything.
Random Dude
on 24 Sep 09Slow day at the office?
Zach Rhoads
on 24 Sep 09Didn’t know Jason started writing for The Onion.
Brandon Durham
on 24 Sep 09“PRESS RELEASE” was the first clue that it was a joke.
Al Abut
on 24 Sep 09It’s so crazy it might just work.
Ivar V
on 24 Sep 09Congrats guys.. obviously the result of synergizing your core competencies and leveraging your web 3.0 paradigms. Let this be a good lesson for all of us.
Timothy Johnson
on 24 Sep 09I have 0.000000001% investment too, can I join?
Tim Courtney
on 24 Sep 09Oh my gosh, this just made my afternoon it was so funny. Love your valuation formula, though I doubt it’s original because it must be in use somewhere
ara.t.howard
on 24 Sep 09touché teacher, touché.
Alex Pyatetsky
on 24 Sep 09This copywriter = $$$$$$$$$$$$$$$$$$$$$$
James
on 24 Sep 09Excellent stuff. Satire is so much more effective than overly sincere posts that talk about venture-capital investors as a “cancer” ;)
Garth Henson
on 24 Sep 09Nice. With this business model, the economy should boom in no time flat… well, in valuation, at least.
Brian Christiansen
on 24 Sep 09Just wait until this gets picked up by actual “journalists.”
BIG TIME!
Matthew Riley MacPherson
on 24 Sep 09Even though I just read DHH’s interview with Gihyo.jp, I still found this super amusing! Funny enough, I’m working on budget and finance-related things right now…
The all-caps press release-style title was a nice touch :-)
Kevin Holesh
on 24 Sep 09I love it. That was an entertaining piece that sums up almost exactly what I think of the “free” model.
Brett
on 24 Sep 09great work – the picture is brilliant and so true in the way the markets and media specifically interpret investments and value. i especially like the “imaginary assumptions…that involve crowdsourcing…and an app store.” lol
Geoffrey Grosenbach
on 24 Sep 09Based on your disparaging remarks about Ruby on Rails, I’ve sent an anonymous tip to TechCrunch to inform them that the entire 37signals stack has been rewritten in Scala.
Joe Cascio
on 24 Sep 09I believe it was Bhatnagar’s faculty colleague Oran G. Tang of Grenada State’s School of Project Management that provided the supporting analysis of 37Signal’s engineering dept. This buttressed the valuation by projecting that merely by expanding the engineering dept. to 100,000 $2/hr offshore programmers, 37Signals could reduce their famous 2 week project cycles to 28 milliseconds and reduce payroll.
Doug
on 24 Sep 09That was awesome! You guys really understand how it works… :)
Fiona
on 24 Sep 09That made my day. :) My favorite was the bit about 12 billion users.
sloser
on 24 Sep 09May I get mine 0.000000001%?
Andrew Hyde
on 24 Sep 092 points for the all caps lock title, because this is REALLY IMPORTANT.
And 2) I will gladly match their offer :)
Beverly
on 24 Sep 09“When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation,” said Mr. Fried. “Once you have profits, it’s impossible to just make stuff up.”
This has a 10+ Chuckle Factor. Thank you 37 Signals for being such a brilliant company with awesome products AND a sense of humor. Who ever heard of that before?
Philip
on 24 Sep 09This is brilliant!! We need to do this at our company!
Happy
on 24 Sep 09Expert use of sarcasm. Informative and funny at the same time. Well done! I even love the closer which states so matter-of-factly:
Also, everything we make will include a compass.
Love it! :)
Tamim
on 24 Sep 09Very very cool. Stellar post.
Andrew Wicklander
on 24 Sep 09Best. Post. Ever.
Michel Ferreira
on 24 Sep 09I am interested in buying 0.000000010%? – do you guys take check?
Jokes aside, loved the article.
Daniel Ice
on 24 Sep 09Sad. They are selling out to the man :)
Vaibhav
on 24 Sep 09Guys,
You’ve given competition to this:
http://www.youtube.com/watch?v=azRzqI3BJ2A
How Ali G pitches to “real” VCs. (One of them even starts considering the idea :P)
Patrix
on 24 Sep 09It turns out that I can similarly value my soul :) Any takers?
JohnBaku
on 24 Sep 09Love you Jason! Someone had to say it… I love the part about Twitter is afraid to implement a business model because then people will know what it really is worth!
Bryan Sebastian
on 24 Sep 09I bet Marc Zuckerberg is totally jealous that you guys thought of this before he did.
JF
on 24 Sep 09For the record, David, Matt, and I all contributed to this completely true press release.
Sebastian
on 24 Sep 09Mr. Jason, I am afraid that you might have been working too much lately.
Ethan
on 24 Sep 09I didn’t think sarcasm was an HTML tag. :p
Scott Wintheiser
on 24 Sep 09You should have held out. I would have given you $2 for the same stake!
Soleio
on 24 Sep 09♥
Ilina S
on 24 Sep 09Priceless :-)
John Coonen
on 24 Sep 09A decade ago during the bubble, this wouldn’t have been a joke.
davesave mcclure
on 24 Sep 09I’m in for $2.
... or $3, but only if u guys agree to a 3x liquidation preference and a full ratchet.
(and, did I mention I need you to Bend Over so I can sign the term sheet with my elbow up your ass? ;)
Pietro_F
on 24 Sep 09+1
Tanner Powell
on 24 Sep 09This article is gold. I love Twitter, but Seth Godin’s recent announcement does seem to have the potential to drink their corporate revenue milkshake a bit. It will be interesting to see how they monetize as more and more folks monetize good ideas on their backs.
Liv Labate
on 24 Sep 09Really funny. Kinda sad though, if you think of when this is written seriously.
shahram
on 24 Sep 09After evaluating your algorithm
[(Twitter followers x Facebook fans) + (# of employees x 1000)] x (RSS subscribers + daily page views) + (monthly burn rate x Google’s stock price)2
you forgot to add the amount of views of this youtube video http://www.youtube.com/watch?v=nrlSkU0TFLs
David Harthcock
on 24 Sep 09Classic! Made my day.
Montoya
on 24 Sep 09Hilarious, and a must-read for everyone in the startup space.
tav
on 24 Sep 09Great writing as always Jason.
Unfortunately the tech/finance industry is way too narrow-sighted to do anything except laugh nervously =(
Perhaps it’s worth starting a Real Business Fund which promotes businesses which do add value—either by generating profits or contributing to society in some way as social businesses do.
In any case, it’s going to be interesting times when the house of cards really comes down in the coming years.
Thanks for the entertainment!
imehesz
on 24 Sep 09hi all,
that’s awesome. Here is the video footage of the press conference: http://vurl.me/BAP
—iM
kyle
on 24 Sep 09welcome to the dragon’s den.
Martin Ringlein
on 24 Sep 09You made me smile today; funny!
Shane
on 24 Sep 09LOL! Only $100 billion?? Surely the APIs are worth another 20 to 30 billion…
Sam Millar
on 24 Sep 09Title had me fooled!
Jason Cronkhite
on 24 Sep 09Jason, I love it!
Do you think Twitter could get their 25 million users to pay $40 a year? 25 mil x $40 = 1 billion. Maybe they should start charging $3.50 a month and see what happens to the user base.
Maybe you undervalued 37Signals? =}
Adam
on 24 Sep 09Fuck the valuation, I want a compass!
BillP
on 24 Sep 09My $1 is on its’ way…
Srikanth
on 24 Sep 09Good one!..Very funny especially the Compass part.
David Sparkman
on 24 Sep 09This had me completely rolling on the ground. But it does seem to be the process by which we find ourselves in once again on the tech front.
Lisa DiMona
on 24 Sep 09I just can’t believe you didn’t say how “thrilled” you were to announce this. Perfect.
Justin Sainton
on 24 Sep 09Wait…this was a joke?
Chad Jewell - Austin Office Space
on 24 Sep 09That was really well done!! HAHAHA!
jonndailey
on 24 Sep 09This is brilliant. Seriously made me LOL.
Tina
on 24 Sep 09Wow, Bezos just made some money then since I’m sure his invested into 37signals was not anywise near this valuation.
Tom Williams
on 24 Sep 09Jason, a stroke of genius. What a fantastic press release! Loved it!!
Steve
on 24 Sep 09I love it! It’s so VIRAL.
Johan Bergman
on 24 Sep 09The best thing I’ve read in many years!
Tina
on 24 Sep 09@37signals, all
Am I the only person who doesn’t understand the sarcasm here?
What’s driving this kind of post? Did someone recently get a huge valuation in the market place? Is 37signals jealous.
I’m being serious … I don’t understand why 37signals would make a fake post like this.
dave
on 24 Sep 09too funny.
Rick Janezic
on 24 Sep 09Jason, I’m not sure if anyone ever got more value from a single dollar (perhaps lottery winners, but most spent much more than the winning dollar). Maybe you can get Dan at PEHUB to do a story…
sj
on 24 Sep 09This makes so much sense, like so many valuations out in the market. Congrats 37signals. Your strategy for stopping revenue generation is very well founded.
Vasudev Ram
on 24 Sep 09@Random Dude:
Definitely. See:
http://ars.userfriendly.org/cartoons/?id=20010216&mode=
Ericson Smith
on 24 Sep 09Sadly, I wish this was parody.
There are far too many breathless announcements on TechCrunch these days touting the “valuation” of this or that internet company. Case in point is the twitter funding rounds that have brought the company investment pool close to 100 Million dollars.
100 Mill! Thats staggering! And they have zero revenues.
I, for one, am tired of this crap.
G. Guest
on 24 Sep 09@Tina,
I immediately thought of Twitter who just got a ton of funding for something without a revenue model.
Damon
on 24 Sep 09Bitter and snarky.
Why not just congratulate a team who’s done a bang-up job creating lots of value (and money) for lots of people? Or would you prefer they sell out to a rival and give up the dream?
Alderete
on 24 Sep 09You think you’re being funny with the “When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation. Once you have profits, it’s impossible to just make stuff up.”
But let me tell you, during the Dot.com Boom, there were very senior people (e.g., our idiot SVP of Marketing, initials R.G.) who said very similar things. We needed to stop trying so hard to sell our product because “a company’s stock price is tied to its revenues. We need to eliminate our revenues so the stock price can soar.”
Seriously.
Peter Armstrong
on 24 Sep 09Funny post, but wow, I think you’re even more unconsciously jealous of Twitter than I thought…
Sebastian Kwiecien
on 24 Sep 09This is brilliant.
Scott
on 24 Sep 09You guys make great apps and have important things to say about business and the industry. Not so much with the comedy…
Clint Ecker
on 24 Sep 09@Peter Armstrong. I think you missed the point, it’s nothing to do with twitter but with sensationalist vapid “tech journalism” and mind-numbing VC-culture, and clueless “analysts” & “social media experts.”
Lee Graham
on 24 Sep 09LMAO! I LOVE IT! Thanks for the laugh gents!
@jevgenijs
on 24 Sep 09thank you for a good laugh! that is really funny:)
John Koetsier
on 24 Sep 09Can I say anything other than: LOL?
Right now I’m physically incapable of much more.
Andrej
on 24 Sep 09Too funny and PURE GENIOUS.
But there is an imminent truth to it – I will use the human analogy: breast fed and naturally born babies are healthier, stronger, have a lowest incidence of SIDS (sudden infant death syndrome), less affected by allergies and autism.
On the contrary, many studies shown that babies born with C-section and raised in the incubator (when not needed), fed with formula etc. have a much higher chance of above mentioned risks.
What do VCs really do? In order for their model to work (get reasonable fees, return miserable returns, on avg. 10-15%), they have to employ plenty on capital in as many startups as possible in a very limited time frame.
But a baby cannot swallow all that food! It won’t grow stronger (maybe only on short-term) and will be exposed to unnecessary risk!
So, grow you baby naturally and make it healthy – maybe you won’t get super rich, but you will be happy and will love it every single day.
dean collins
on 24 Sep 09LOL – the IRS is going to love you this year.
...think about it :)
Have fun paying off that tax bill on those options you own.
Jon Pederson
on 24 Sep 09Brilliant. Simply brilliant.
Chuck
on 24 Sep 09@Tina:
It’s making fun of the the weird idea circulating around the industry these days that giving your product away is the best way to make money. Companies that literally don’t make any money at all are getting these huge valuations — which obviously aren’t based on any actual monetary value, since the company doesn’t make any money. Jason has written several articles about how he still favors the old model of making something good and charging for it.
Anonymous Coward
on 24 Sep 09Seriously? You people are laughing out loud at this?
JP Werlin
on 24 Sep 09@dhh – I hope you guys can leverage this investment at the end of the day and move the goal line forward.
Garrett Winder
on 24 Sep 09AAAHHHH HAHAHAHAHAHAHA
Bryan Burkhart
on 24 Sep 09Love it! Well done.
Andy Brice
on 24 Sep 09:0)
fumbling around
on 24 Sep 09LOL This is synergy coming to a theater near you. I can only hope that the social media guru I’ve hired to take my project global will also help make this post go viral across the various platforms around the net. In the meantime, I’m so tweeting this, dude.
Alexander Ainslie
on 24 Sep 09Too funny guys. Too funny.
Collagist
on 24 Sep 09This is such a great news we are so very excited and look forward to the freeconomics model. This is a very bold and industry changing move.
We can’t wait to sign up when the free versions of all your products become available. Please don’t let these new riches get to your head.
Congrats!
Gene Ehrbar
on 24 Sep 09I want in for $5. Dilution a-OK. Where do I sign up?
indi
on 24 Sep 09it is to laugh
Anonymous Coward
on 24 Sep 09Brilliant!! Absolutely brilliant!!! How do I invest? ;-)
Andrew Mattie
on 24 Sep 09This brought a great big smile to my face when my coworker sent it to me. Brilliant!
RP
on 24 Sep 09best thing i’ve read… maybe ever. so sick of twitter.
Adam
on 24 Sep 09Pure awesome.
Jason
on 24 Sep 09stupid
Otto Nordpol
on 24 Sep 0937signals options holders: I’ve got some Luxury Executive Mansionette Estate Residences in Modesto I can sell you.
Mike
on 24 Sep 09I think you guys sold yourselves short.
Karl Perron
on 24 Sep 09Love this press release!! printed, framed, and hangin’ on the wall. :)
Bruno Miranda
on 24 Sep 09Wow, you guys are RICH, holy cow you should buy google now.
Nicolai Kollner
on 24 Sep 09lol – funny
Anonymous Coward
on 24 Sep 09How is this “signal” and not “noise”?
Brian Chiasson
on 25 Sep 09awe…NO COMPASS??
AFR
on 25 Sep 09This is the best VC article I’ve ever seen. Now you should sort out the Treasury.
David Karp
on 25 Sep 09Hey, that’s what I’m doing!
bowerbird
on 25 Sep 09cornered the market on compasses, i see. very clever.
-bowerbird
Rex
on 25 Sep 09Good use of blog for free press!
Eric Russell
on 25 Sep 09I have written my congressman. I am donating $130 to the US Treasury to make an investment in your company. This will have a value of about 13 Trillion dollars which the Treasury can exchange evenly for the national debt.
Congratulations!
ChrisFizik
on 25 Sep 09this post is the stuff of legend.
Really surprised to see the kneejerk reaction from 37S but wow, it’s what we’re all feeling, so why not. Getting Real.
vaitheesk
on 25 Sep 09wow! After getting $100bn valuation, competing with Onion too! :)
Jared Dobson
on 25 Sep 09YOU DID IT!!! Congratulations!!! I knew you could!!!
Wow I love freakconmics. It’s how the government pays bills it’s trillion dollar debts.
David S.
on 25 Sep 09Less really is more!
Anol Bhattacharya
on 25 Sep 09“Getting Un-Real”
dack
on 25 Sep 09Fellas, don’t hate just because you didn’t think of it first. Where is the enormicon fun? This is just sour grapes.
James Au
on 25 Sep 09Hailarious.
Barack O'bama
on 25 Sep 09I’ll buy 37 signals. I’ll give you $500k, and any model GM that you want.
MC
on 25 Sep 09Just for that, I’ll pull out these geek complements I promised myself I’d never use:
+1!
Woot!
Dan
on 25 Sep 09HA! Eat that twitter!
Shanti
on 25 Sep 09Epic win.
Kevin Burton
on 25 Sep 09Nailed it! Couldn’t have said it better myself.
Oh Hi
on 25 Sep 09I LOL’D!
Adhip Gupta
on 25 Sep 09I love the name Aanandamayee Bhatnagar for the professor. Just goes to show the thought that went into writing the article.
michael
on 25 Sep 09you just found another happy customer :-)
Wishful Thinking
on 25 Sep 09http://blogs.wsj.com/deals/2009/09/24/breaking-news-twitter-to-raise-100-million-from-insight-t-rowe-price-other-investors/
Cyril Godefroy
on 25 Sep 09Killed me.
Does it me I get my basecamp and Highrise for free? Don’t you want to buy my registration instead? C’mon, guys.
nathe
on 25 Sep 09If you guys are looking to be a quires we are worth $10 trillion. Interested in a scrip for scrip deal? We’ll chip in a cash component of $1 million for the compass initiative.
Sudhani
on 25 Sep 09trying to find an investor myself! LOL.
Stefan Mahlstein
on 25 Sep 09Excellent! This is something that I will promote to more companies – combined with a quick listing it will be a huge success :-)
Chris Comella
on 25 Sep 09It will be interesting to see the return on investment the new Twitter investors get…. if any (at least when you risk-adjust it and discount it to present value).
dipankar sarkar
on 25 Sep 09Awesome post !!! prof. Bhatnagar’s formula is awesome.
johnnyboy
on 25 Sep 09Ok, so your next VC round is going to be a pretty hideous down round, I guess.
pierre tournier
on 25 Sep 09merci! you made my day.
Aanandamayee Bhatnagar
on 25 Sep 09I am very proud of my formula. It really works!
Joe Rubin
on 25 Sep 09Not too far from the truth :)
Eoin Redmond
on 25 Sep 09Which stock market are 37signals going to be floated on? I’ve got 8 dollars I’d like to invest.
Oscar
on 25 Sep 09Haha, fantastic. That’s a great formula btw.
Steven v.
on 25 Sep 09Great post Jason
Vassil Mladjov
on 25 Sep 09Jason this is a great deal man, congrats. Blogtronix raised $5 from my son (head of 5thgradeventures) to buy him ice cream at Fentons yesterday on $500 mil. eval. The bad part is that my wife found about it and now wants to take over as a CFO. Good move on the $1 Bil.
Anonymous Coward
on 25 Sep 09dont get it
Nathaniel Flick
on 25 Sep 09The best ideas are indeed free: http://www.bwagy.com/books/
Helgi Thor
on 25 Sep 09Hahaha! Great work guys. I recently saw a press release, alarming similar to this one:
“VC invested 50 Million, company worth now 1 Billion.”
WTF? What exactly is the hidden X factor in this formula?
I've even blocked out the name of the company, probably because it's SUCH A LOAD OF CRAP. I wish them well of course.Hoo Noz
on 25 Sep 09Total genius. ROFLMAO. Heh, about 5% more realistic with some of the names and you’d have the techie press and VOFBs (Valuation-Obsessed FanBois) running around like chickens with their heads cut off.
Brilliant stuff. Congrats.
Arjen Schat
on 25 Sep 09Why think globally if you can go universally.
Peter van Dam
on 25 Sep 09Hahaha…..
Can I hire you as CVMO (Chief Valuation & Markering Officer) for all our start-ups in Amsterdam?
Peter
Kevin Garton
on 25 Sep 09WELL DONE! I’d like to invest.
Neil Kosterman
on 25 Sep 09Oh no, now you’ve done it. The Onion will be putting a full court press on to steal away the brilliant writer[s] who invented this. Great job! You could lose one or more talented employees, as a result.
Social Couch
on 25 Sep 09Awesome Stuff!
“Stop generating revenues”!!
Matt W.
on 25 Sep 09Hah, funny stuff, thanks for the morning chuckle :)
David
on 25 Sep 09The onion would be proud.
Grant Griffiths
on 25 Sep 09Now wait, I thought we were just suppose to work our butts off. Build a great product. Build a great company. And then just give our stuff away for FREE, because that is the best business model now.
Aldo
on 25 Sep 09Hey, I’ve got 50 cents to spare. Can I buy 0.0000000005% of your company? Will I be able to vote?
;-)
Good one!
Cheers from Brazil!
stef
on 25 Sep 09Congrats for that article. Really funny and clever. “We’ll give away everything for free and let the market speculate about how much money we could make if we wanted to make money. That way, the sky’s the limit!”
I totally agree with you ! The general economic climate says “the sky’s the limit”... The last economic crisis came from that kind of assumptions. I think that real-time is probably a sort of a new dot-com bubble.
Don Schenck
on 25 Sep 09Awesome! Now, you’re “too big to fail!”
Don C.
on 25 Sep 09Perfect.
subd
on 25 Sep 09Self indulgent nonsense
Dan Tillberg
on 25 Sep 09I’d be willing to bet you could resell that 0.000000001% stake for at least $100 today.
That would push the valuation up to $10 trillion and solve most of our current economic troubles.
erik
on 25 Sep 09This is a great read on a Friday morning. Thanks for the humor…
Brian Armstrong
on 25 Sep 09Spot on as usual, thanks for keeping the tech community sane!
Stefano
on 25 Sep 09I think Bhatnagar’s formula is missing the relative density of boring Techcrunch articles about the target company. You guys are my personal messiah!!! Awesome post!
Brian
on 25 Sep 09This was the best thing I have ever read!
Mike in Syracuse
on 25 Sep 09Ha! Nicely done; thought I was reading The Onion! (and I mean that as a compliment)
skillguru
on 25 Sep 09At least some one came out in open and said it openly. Else we were going to have ridiculous valuations and non sense IPO’s. Home run for this post!!!
Cal Morton
on 25 Sep 09Since the $1 investment was syndicated, I’d like to invite Yardstick and IVP to place their change in our company. While we’ve always funded our growth from cash flow, we could totally cease invoicing clients in order to achieve ANY valuation desired.
Ivan Stegic
on 25 Sep 09Classic. Thanks for the laughs :)
Philip Wilkinson
on 25 Sep 09Very good guys – a point well made.
Chance Bliss
on 25 Sep 09Love it. Interesting timing. I just read this post Why Twitter is worth $1 billion by Stephen Baker, a senior writer a BusinessWeek, who explains how he hates writing these business valuation stories.
“Twitter can become a great company, reach billions of people, and spawn businesses and services we haven’t yet envisioned. It’s possible…Or it could fail. We don’t know.”
Stan Hansen
on 25 Sep 09IF YOU SAY IT IN ALL CAPS, IT MUST BE TRUE!
Ben
on 25 Sep 09From one IL company to another- classic
Rick Toone
on 25 Sep 09You’ve always been a great company and now you’re even better. Long live valuation in a free world.
Jonathan
on 25 Sep 09Actually, if you got anti-dilution protection for your investment and the next round is a down round, you probably just bought yourself 99.9999999997% of the company.
Gianni D'Alerta
on 25 Sep 09It seems that 37 Signals was given a ridiculous valuation/offer… which this article seems to be a reaction to. This was the most interesting, smart and entertaining post I have read all year! I would keep my eyes on the news I predict 37 signals will be sold off soon or go IPO. OR it was just an exercise for amusement sake.
Yang Yu
on 25 Sep 09there are so many of these type of evaluation now adays they are all pie in the ski figures. The evaluation is really based on the number of Open Media and Social Networking advocates rather than the actual business. When a business is based purely on “connecting people and ideas” it is a great tool and great service, however, just like the “air” we breath, this type of service is only used when it is free, but we all seem to neglect its existance. So who in the right minds would bother to “Donate” to “air”? and how can you even evaluate “air” in terms of $? i think you can’t.
As more and more personal content is transfered onto the web, the noise level also increases (hence a good search engine like google is making a shit load of $$$). I like to think of this phonomenun as “A collective mind” The internet, web 2.0, rails, social media are the “nerves” of this collective mind, and iphones, macs, pcs are the end points, and individuals being the processing devices. so we are actually seeing the evolution of this collective super organism in a technology enviornment. the value of this organism can be truly realized when it has all of its organs fully functional and complete.
twitter must evolve and develope a uniform function that is more than just the “nerves”. it needs to develop hands.
Mike Francois
on 25 Sep 09I represent a Nigerian Capital Injection Firm, and we would like to invest $1.50 US (in the form of copper) for a share equal to 0.000000001% of your firm, which, by our calculation, would raise the value of your company to $150B US.
Please respond to my email address with your bank account number, and we shall roll the copper into a paper tube delivery device and have it deposited in your accounts.
We will also need you SSN and your mother’s maiden name.
Wes Garrison
on 25 Sep 09Congratulations on the new investor!
Fred Sanford
on 25 Sep 09This is great news! I can’t wait until Scoble tweets something insightful about this.
Andrew Brooks
on 25 Sep 09You need to have a Microsoft Windows 7 House Party to celebrate the valuation. Microsoft has some ideas using live action stock photography!
Harry
on 25 Sep 09As long as you get acquired by Intuit, this is alright by me.
Tina
on 25 Sep 09How funny would this be if 37signals, as a joke sold that 0.00000001% stake in the company but that person had a Full-Rachet Anti-Dillusion clause.
That person, assuming 37signals can’t get a pre-money value higher that $100B, essentially just BOUGHT 37signas for a buck.
@37signals, did this just backfire on you in a MAJOR way. Hope you didn’t just sell your company away for $1.
Peter Corbett
on 25 Sep 09Hey guys instead of messing around with silly posts, can you make an iPhone app that would be really useful for all of us to use?
KTHXBAI
Sonali Shetty
on 25 Sep 09Loved this post – you go Jason. “Why limit users to people?” said Bhatnagar – Priceless
erik
on 25 Sep 09Kudos Jason for the reminder,
Not needing to generate revenue works fantastic when you can fly around the world and hit every conference and every user community.
Kinda not possible when you’re a paycheck away from losing your business and/or mortgage.
Dating in Wales
on 25 Sep 09ahh, love it – the true value of money
Lisa Rogers
on 25 Sep 09these VC guys are so sweet :)
Srikanth
on 25 Sep 09Now we will see 38signals.com as the next venture
Malte Landwehr
on 25 Sep 09This is hilarious. When will the next round of funding take place?
jacob morgan
on 25 Sep 09nearly fell off my chair laughing, this is great :)
lehman
on 25 Sep 09Well Done Jason & co. I am having my MBA at Grenada State’s Schnook School of Business ….
seriously, aren’t you guys just jealous that Twitter gets so much injected funds.
Rob
on 25 Sep 09Spot on and this excerpt from the NYT is exactly whats wrong with everything thing. “Now the start-up appears to have chalked up another achievement. Twitter, which has no discernible revenue, is set to raise about $100 million of new funding that would value the company at around $1 billion, a person briefed on the company’s plans said Thursday”
How is it an achievement?
Paul OFlaherty
on 25 Sep 09That’s classic, absolutely awesome. You have studies have been fruitful at the school of sarcasm grasshopper….
Gilles Misrahi
on 25 Sep 09And… only for the compass, would you have a price ? Thank you.
prophet
on 25 Sep 09Great stuff Jason.
What about changing “That’s why we’re switching to a ‘freeconomics’ model.” to That’s why we’re switching to a ‘freekonomics’ model.”?
Chad Garrett
on 25 Sep 09This is by far your most entertaining post yet. Forget your serious blog. This is your true calling. I want more.
Ron
on 25 Sep 09Awesome.
Still speakin the gospel after all these years.
Nate
on 25 Sep 09Absolutely hysterical. Well done Jason.
Martin
on 25 Sep 09Love it! :)
sos media
on 25 Sep 09I want in.
JohnONolan
on 25 Sep 09Absolutely. Friggin. AWESOME. :)
Cork
on 25 Sep 09JEALOUS MUCH
leslie devries
on 25 Sep 09It’s best to not be in a hurry to start generating revenues, so as to minimize negative effects on the community. As a long range strategy, you might want to acquire enough non-performing loans to mitigate any revenue stream.
Erich Ocean
on 25 Sep 09Funny, though I’ve been told the IRS considers a completely lame valuation like this to have actual tax consequences, even though no actual cash or revenue is involved. You could be required to pay taxes on “gains” as a result…
Shuki Haiminis
on 26 Sep 09I have a crisp twenty on my desk…think we could open up Acquisition talks :)
JJ
on 26 Sep 09Awesome, man that’s just awesome.
michalsn
on 26 Sep 09Well, so where is my free Max account? :P Great post.
faddep
on 26 Sep 09its ok to be jealous when other entrepeneurs make a ton more money than you with an unprofitable company. which at least makes it profitable for them, nevertheless.
so, you still lose.
Benjamin Welch
on 26 Sep 09@faddep It’s okay to be jealous of people who believe in what they do and very profitable doing it. In the timely words of Walt Disney,
“I don’t make pictures just to make money. I make money to make more pictures.”
Doing something you’re truly proud of is where it’s at. Whether it’s building unprofitable companies and selling them or building a great profitable company and doing what you want to do most.
So, something tells me they don’t lose.
faddep
on 26 Sep 09I agree with that concept. However, this post – while on point from an industry standpoint – belies the sentiment of a valedictorian wallflower watching the vapid prom queen get crowned.
yawp
on 27 Sep 09...and everyone at the Church of Capital say “amen.”
AMEN!
Hallelujah!
...keep chasing paper; we can always print more.
Adam Ierymenko
on 27 Sep 09I see what you did there.
Ken Cybulska
on 27 Sep 09Not unlike the Rupert Murdoch valuation of MySpace, by what… approx $600 Million. (Good show old man!)
Ken Cybulska
on 27 Sep 09A stratospheric valuation makes a Internet start-up look as blazing hot as ‘this years girl’, only to wind up an Internet shit heal just a few short years later, as we are witnessing all over the place: MySpace, Yahoo, Ebay, etc. Internet companies seem to bear more in common with new flavors of hot new movies or television series, seeming to run out of steam in a few brief business cycles. I’m waiting for Google to eventually tank as well, as hard as most people would find that to believe at the present time.
Charlie Roche
on 27 Sep 09Hah! I love it, brilliant stuff. p.s. keep up the great work guys
shuki
on 27 Sep 09Too funny!!!
Rob Morgan
on 28 Sep 09“When it comes to valuation, making money is a real obstacle”. I actually had a conversation with a potential investor back in year 2000 when pitching a dot-com style company listing. Our dot-com brethren at the time were enjoying PE-ratios that looked more like gamma-ray frequencies, whereas we were profitable and were asking for an optimistic PE just north of a completely sound but mature industrial. Our investor had placed some considerable cash with a couple of dot-com companies with business models based on vapor, but declined to take up an allocation of our stock because we were profitable – if we hadn’t reached profitability they “would have been willing to apply a different valuation model”. As a profitable company, we would be rated as an industrial, with a serious discount for our novel status – exactly the opposite risk perception of the more vaporous siblings which, by the way, mostly tanked within 2 years.
Ben
on 28 Sep 09Jason, you should write a leadership fable parody (Who Moved My Cheese, etc) and base it on something outlandish like this post. Then actually release it in hardback through your publisher. We need some business comedy on the shelves.
DanskeMads
on 28 Sep 09Jason, you’ve got a reply from the well-respected Swedish new media blogger, very early Twitter-user and all-things-media wizkid Joakim Jardenberg. He is not at all amused by your so called press release.
His blog entry is in Swedish but here is the translation (translated by Google Translate): “I think Jason is getting frivolous now. I had not expected. It was fun when he lashed the Mint a little (although there probably were not quite correct), but here he slugger to both wild and wide.”
Quote taken from blog entry: http://jardenberg.se/b/jardenberg-kommenterar-2009-09-25/
In the comments he goes on to call Jason some rather nasty things. The comments are in Swedish, but Google Translate is your friend.
Joakim Jardenberg
on 29 Sep 09Jason, I don’t call you “nasty things” I’m a great and long time fan. I have made some remarks on my daily commentary on your stand on VC’s since your Mint post. Nothing out of the ordinary. But someone seems to think it’s a big issue.
I don’t. Rock on!
DanskeMads
on 29 Sep 09Joakim: Your answer here does not really correspond to what you wrote in your Swedish blog.
Could you make your “remarks” in English so that Jason gets a chance to respond.
DanskeMads
on 29 Sep 09This is what you get if you enter Joakims Swedish blog post and comments into Google Translate with no changes or corrections made:
“I think Jason is getting FRIVOLOUS now. I had not expected. It was fun when he lashed the Mint a little (although there probably were not quite correct), but here he slugger to both wild and wide.”
“Found that Jason’s father around like a ferret and says a lot of strange things.”
A wild frivolous ferret slugger saying a lot of strange things. In my book that’s quite nasty, especially since you do not specify why this should be the case.
mobile scum
on 29 Sep 09That’s a great article. I can hardly believe that so many posters clearly haven’t experienced the reality of what this joking post is making fun of. Just about every academically-founded (spin-off) IT hereabouts (Japan, and I hear also in Oz the same problems) suffers from this, and the VCs so often act idiotically (paying management without requiring responsibility). The company I work for tried (by it’s president and upper management) to sell itself to other larger companies (unsuccessfully) in secret while lying to the other employees that it’s goal was to produce a viable product, yet crushing any attempts by knowledgable people to enact the plans necessary to build & maintain such a product. A case of fraud combined with the mindset of the .com bubble. Now I can spot these lies & the companies that spout them (by one or two questions, and a quick glance at the “vision statement”) a mile off and avoid them like the plague.
lalu
on 30 Sep 09Wow, this sounds a lot like the theory behind the last US economic stimulus bill which also relied on a lot of creative math.
gotnoteef
on 30 Sep 09I’ve got £1.00 sterling – fancy some international VC?
Andrea Decker
on 01 Oct 09nice wall texture
This discussion is closed.