"Square, the payment technology company founded and led by Twitter CEO Jack Dorsey, this evening raised $243 million by pricing its initial public offering at $9 per share, which would imply an market value of around $2.9 billion.
It is a major disappointment for the San Francisco-based company..."
Can we just all let that sink in for a second?
A "major disappointment".
What I wish for every single entrepreneur out there is to be so majorly disappointed in their lives.
The only people who should be disappointed where the regular folks invested in these T. Rowe Price and Fidelity funds who bid the company up to ridiculous valuations in their pre-IPO rounds. Seemingly everyone except them knew that the company wasn't worth that much--but it didn't matter. Unlike venture capital funds, they don't make money directly off the multiples of their return. They make money on asset gathering--having the biggest pool of money and needed to put lots and lots of dollars to work. If you were willing to take their $500 million checks, they were willing to give you whatever valuations you wanted.
It's a market that had gotten completely detached from the regular venture capital market--you know, the VCs and angels like SV Angel, First Round, and even Foursquare CEO Dennis Crowley who I'm pretty sure aren't crying a river over a multi-billion dollar exit to the public markets after just six years. They did quite well on their angel investment in Square.
Don't let the media tell you things are bad and the sky is falling, when it's really just a return to normalcy in a completely overheated part of the market that they themselves couldn't get enough of. For every seed funded company struggling to get press, journalists fell over themselves to get the latest scoop on who became a decacorn and to rewrite the same story on private valuations that meant absolutely nothing.
What's worse is that this end of the market is even affecting early stage VC mindset. If you're a VC and you think for a second that whether or not Square pricing at $2.9 billion or $6 billion has anything to do with that Series A you're about to do, please pick up your marbles and go home. The very fact that you created a fund so ridiculously large that can only survive if you get $6 billion exits was your first mistake.
I hope every company has a disappointing IPO this good. Maybe for once public investors will get a chance to benefit from a little runup of the companies they use everyday.
Congratulations on your huge disappointment, Square. I'm proud to say that I was dollars number 476 and 477 to be swiped on the platform after Jack demoed the very first prototype to me on a bench in Washington Square Park in late summer 2009. Congrats on your huge disappointment.