While I’d like to fancy myself as an angel investor the truth is that I’m too busy running Fab to effectively evaluate deal flow.
As such, I’ve adopted a very simple investment thesis:
I only invest in products that I use.
Until recently this thesis had led me to invest in only 2 companies beyond Fab: Twitter (via its TweetDeck acquisition - I was an early angel investor in TweetDeck) and RJ Metrics. I use TweetDeck/Twitter all day everyday. I use RJ Metrics daily as well.
I say no to dozens of investment opportunities because they don’t pass my “do I use it?” test.
Today I’ve gone long on Facebook, investing a good chunk of money in Facebook stock at $19.20 per share.
My Facebook investment thesis is as follows:
- Hundreds of millions of people use Facebook every day. I am one of them. Facebook is not an app, it is the app that ties together the social web. I don’t know hardly a single person who doesn’t spend at least 30 minutes on Facebook each day. That’s time they used to spend watching TV or consuming some other form of media.
- Fab spends millions of dollars on Facebook advertising and we get a great return on that investment. It is a fantastic channel for us and it delivers real ROI with high conversion rates to purchase and then super high viral sharing rates. Facebook advertising works if you know how to use it and stick with it and turn it into a science. And it keeps getting better. We’ve seen big improvements over the past few months. 75% of Fab’s advertising is on Facebook and we will continue going big on FB as long as it remains a productive channel for us.
- Smart vision + smart team + smart execution = potential for amazing results. I really do believe that the smartest most creative teams win. The key for Facebook will be to keep its employees focused and incentivized for the next and next and next big things. Don’t become AOL (where super rich managers lost their way). Become Google where hiring standards were kept high, fresh managers were heavily incentivized to develop the business, and where the leaders constantly pursued an innovative agenda. I believe that Zuck and Sheryl will do this.
And, then there’s instagram. Instagram is THE mobile photo sharing network. Facebook just got mobile in a big way. I have no doubt that Facebook will figure out mobile in time. Heck, I’m on a tour bus right now in Rome and everyone on the bus is on Facebook on their mobile, and they’re taking all their pictures using Instagram.
In terms of valuation, I’m long. I believe that 10 years from now Facebook can be worth $200B. I don’t care if it takes 10 years to get there. My own math says that FB is worth around $30/share today. But, again, I’m long.
Facebook today actually reminds me more of Amazon in 2000 than Google. Amazon had an opportunity to define an industry, ecommerce, and they have. I believe that Facebook has a similar opportunity to define the social web for decades to come.
Disclaimer. Fab will continue allocating our marketing dollars based on the channels and platforms that deliver the best return on investment, despite where I personally invest my own money.