Pinterest Completes $200M Funding at $2.5B Valuation | Hacker News Reader

Pinterest Completes $200M Funding at $2.5B Valuation

allthingsd.com

75 pointsssclafani47 comments

Always great to hear about success coming from humble beginnings:

Pinterest used Hacker Dojo as their primary workspace in late 2009, and hired both of their first two engineers from the Dojo's membership.

Source http://www.hackerdojo.com/InvestinStartups

(Writing this as I take a break from working on my startup at the Hacker Dojo...)

Ben/Pinterest are probably the most well-known ex-residents of the Hacker Dojo. It is an awesome place to work, and there lots of promising startups that have set up shop here.

Speaking of hiring engineers, the 2013 Hacker Fair is coming up: http://www.hackerdojo.com/HackerFair3

That is a great recognition for Dojo, maybe Dojo should showcase successful entrepreneurs/developers that have been active Dojo members.

Two notes:

  1) They raised $100MM just 9 months ago.  That's $300MM raised in 
     under a year.  Money is stupid cheap and this is sorta terrifying.
  2) The word "revenue" is not contained within FTW.

Instagram drew an incredible line in the valuation sand as a "comp".

That's smart of them. Anyone remembers 2007-2008? Even blue chip companies had to beg and give their proverbial first born to refinance their debt.

A billion is not what it used to be, was my first thought but who can blame Pinterest.

I think Pinterest is in a great condition ... at this time.

Like they have tons of users who religiously use their product, and it's actually coupled with intent to buy, which makes monetizing easy.

However, you can't change the fact, that pinterest is riding on a "trendy" wave right now. There is not a whole lot that keeps you threre. Just in two years, there can be another spot where all the women in world woo about their lives.

It's an inherent social problem which accounts for the so far pretty short lives of social companies. You gotta have to be able to tie/commit your users much like Facebook does (owning your diginal private life).

I thought the problem with Pinterest was that "intent to buy" was actually really low compared to other traffic sources.

I know its an old article, but has anything come out contradicting it? http://www.forbes.com/sites/jjcolao/2012/07/13/new-data-show...

At this point the data points coming out are almost conjecture. Here's something more recent that says almost the opposite: http://www.entrepreneur.com/article/222740

I know they're also making a new push specifically for brands to be able to manage content and traffic more easily: http://business.pinterest.com/

Given the new focus on businesses and the scale at which Pinterest already operates, the $2.5B isn't so hard to believe.

I imagine it varies a lot by category/board. Cat boards (which is what I use it for) = no intent to buy. Cooking implements = high intent to buy. Women browsing $20k dresses, somewhere in between.

This is just one data point, but my mom and I run a cooking blog that makes a decent amount of money from the Amazon affiliate program, and people from Pinterest definitely come to her site with an intent to buy. Given how much money we making from Pinterest visitors, it doesn't seem crazy to think that they could figure out a way to monetize their user base.

My girlfriends makeup site embraced pinterest in early 2012 which resulted in gradual traffic growth from females who have been strong contributors and buyers.

I feel its more saturated now but still a great platform to leverage.

The amount of ideas my wife, her sister, and many other women in their lives get from Pinterest is amazing. It's a household name now in our family. From birthday gifts to children's crafts, I'd venture to guess at least 1 idea every 1-2 days.

There's something there in terms of monetization. I'm just not sure what yet.

It is worth pointing out they are using AWS. Gave a really interesting talk at PuppetConf '12 [1]. Talks about the stack and how they use it. Seems they used AWS to their advantage, to keep up/ahead of the hunger for computing power.

[1] https://www.youtube.com/watch?v=aU-bCbBq8zs

I do not understand how the company is being valued at 2.5B. It doesn't look like even the business accounts at Pinterest have any type of fee associated with them.

How do they make money? Or is this valuation most likely based on the possibility of making money down the line?

EDIT:

According to this post, http://news.ycombinator.com/item?id=5254498, it seems like it is based primarily on potential revenue from data mining.

Pinning indicates purchasing intent, and mediating purchasing intent is the most lucrative thing anybody has ever found to do with the web (search advertising being the all time greatest example).

I think the promoted items model like twitter's business model suits them quite well.

They said the same thing about Instagram when it was purchased by Facebook for $1 billion. I'm starting to think that's not a good metric.

It depends on your criteria. Many people on here like to discuss sustainable businesses. Being acquired prior to reaching profitability is obviously a huge hit for the entrepreneurs, but it's irrelevant to the other conversation.

Not being snarky but is there a profitable website who's primary source of revenue is based on data mined from their users?

I keep hearing about this "data mining" revenue stream but can't think of a place where its worked. That being said Pinterest seems like one place where it might.

Google? Targeting interests is a solved problem.

Surprise, suprise Andreessen Horowitz involved in another crazy valuation.

They are throwing lots of money trying to make a name as VCs, that's my opinion.

Pinterest as compared to Instagram is better deserving of this kind of valuation, I think. Their product is so good (pretty much a picture focused front-end) that thousands of others (myself included) have copied. And it works, brilliantly.

I'm confident that they can drive sales... however, can they do something interesting with that.

Or maybe Yahoo should buy them.

Is it just me or did they just make their site require you to register to view it now? http://pinterest.com/

Edit - Interesting. If you do a google search for something like "Pinterest Cake" you can get past the registration.

I noticed that today too, I don't like when sites force behaviors like that. Groupon used to be the biggest offender, Quora still use these tricks.

The "where is the revenue?" line is tired when talking about Pinterest. Unlike sites like Instagram and Facebook it's pretty obvious they can start making a shitton of money at any time. The biggest question is how sustainable this product is. People focusing on revenue for a product like Pinterest are missing the point: I would want the company to be focused on growing the user base, not toying around with revenue models at this point.

What is their path to making a "shitton" of money? I don't know, I am really asking.

They have purchase intent up the wazoo. They could cut a rev share deal with one or two of the big vendors easily. They could add paid placements. They could cut affiliate deals on behalf of their curators. They could add a payments system for people to directly purchase items they browse on Pinterest. Etc etc

Do they charge websites for traffic referral?

That's only part of it.

It seems this "affinity data" model is the basis for the high hopes and high valuation: http://gigaom.com/2012/03/24/pinterest-weve-got-a-business-m...

Pinterest is in a great spot. Everybody pins products - they'll be able to monetize. I'm betting this'll be a decent investment. I see why Tapiture is doing the same thing for the men's market here in LA http://wp.me/p1fNUP-gK

Cool. I never thought Pinterest would reach this far. It's promising for all web startups.

EDIT: Removed because I'm tired and my reading comprehension is crap.

How do they make the evaluation evaluation, when they don't earn anything? I would imagine it is hard to put a number on a user on their site, when they dont generate any income?

I would love to see the pitch deck they had for this round.

My impression is that most pitches that happen at that stage are simply growth rate followed by revenue projections, no real magic when you're seeing the growth that they are.

$200m is a lot to throw at a company that only has a lot of users.

They have little to no revenue at this point and no current revenue streams that point to being able to generate anything worthy of a $2.5b valuation. I guess my point was that I'd like to know what revenue streams they are anticipating creating that would warrant such a high valuation.

That's not how the game works:

The investors at this stage still don't care about revenue. The main question is whether or not they can flip the investment to some other firm later (that is to say, will the picture look rosy enough in the future that someone else will buy in at a higher valuation).

Revenue starts to matter in the last round before the IPO (if it goes that route). If the sequence ends in an acquisition, revenues won't really matter..

yeah it's weird, especially since you can't be sure they will make money in the end, but that's how the incestment money works

Can someone shed light on how Pinterest and Instagram can be worth billions? But Reddit is only worth 400m?

Pinterest is millions of people freely marketing consumer products to each other. The potential for both referral commissions and data mining is huge. Reddit is a fancy meme and porn sharing forum (the main subreddits dwarf all the 'intellectual' ones combined), which few advertisers are interested in, and which has been unable to produce enough revenue to maintain more than a skeleton staff with self-serve ads and premium accounts.

This is a complicated question with many angles. First, Reddit is now apart of bigger company. Obviously, this changes anything to do with valuation. Do investors want a "piece" of a company that is within a bigger company? Maybe, but if they do the valuation is going to be a lot lower compared to if Reddit was independent.

The other issue is that Reddit makes money therefore the valuation is based on earnings. Their earnings might be low for the amount of traffic they get. Sometimes it's better to not generate any money because the valuation would be based solely user growth+engagement.

With this being said, if Reddit was an independent company then they too would have a crazy valuation. I am sure the founders think they sold way too early but at the time, it was the best option. Kudos to the buyer who didn't let it enter the M&A dead pool.

If they were an independent company and didn't have any revenue history to go by I think they would be worth more. Part of the Pinterest valuation would be speculating on how much they could generate through various forms of advertising.

A reddit with its present amount of users and no 4chan influence would be worth a billion. Masturbation jokes on the front page scare away advertisers.

Reddit still, strangely, quizzically, confusingly, maddeningly does not monetize on outbound links.

Here: http://www.reddit.com/r/shutupandtakemymoney

Or Here: http://www.reddit.com/r/buyitforlife

Every single link to amazon etc. via reddit should be earning them money via viglink or their own program.

If you accept that facebook was worth $100 billion, and if you accept that instagram was a credible threat to facebook, then it follows that instagram was perhaps worth 1% of facebook. Reddit is not facebook's or google's threat so its valuation is not based on a big company's valuation.

What's their revenue/net?

Reply on news.ycombinator.com