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The Top of the Public Internet Pyramid

There is a very interesting article on Venturebeat by Glenn Solomon with a great graphic produced by Cowen and Company that separates public Internet companies by growth and profitability (see below).

Essentially it shows that there are very few companies growing revenue at over 30% per year that also have greater than 30% EBITDA margins and the 6 companies that fit in this category are all outside the US (Russia, China and Latin America). One of these companies, Yandex, was a company we invested in 11 years ago when the company raised its Series A round. Today it is the largest search engine in Russia and completed its IPO in June at an $8 billion valuation.

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The Return of the Internet IPO

Zillow priced their IPO yesterday and began trading today. Zillow increased their pricing range during their roadshow and then priced above the range at $20 per share and ended the day at $35.77 per share (valuing the company at $540 million when they priced and closing the day at $960 million). This is a great start for the first Internet company with run-rate revenues of less than $50 million to go public in a long time (with the exception of Jiayuan (NASDAQ: DATE) which did go public with a $50 million run rate but likely was able to price successfully due to its Chinese market focus). I remember the first IPO of a company I had invested in 1997. The company was Andover.Net (NASDAQ: ANDN), it went public in late 1999 with $5 million in revenue (it priced its IPO at $270 million). It is interesting to compare the relative revenue multiples of these, the company from the first Internet wave valued at 54x revenue, the second company from the current Internet IPO wave priced its IPO at 12x revenue.

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The Implications of the Global Web for US Startups

It is extraordinary to think about the recent events in Egypt and the catalyzing impact of both Facebook and Twitter. Not only is it amazing to see people organizing and communicating through new methods on mobile devices, but these services are delivered by companies in the US that are less than a decade old.

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