Let’s play the Plaxo valuation game.

plaxoYesterday Plaxo put itself on the block for sale. They have hired investment boutique Revolution Partners to assist in the sale.

They have had two notable successes; the first one was that have been able to overcome the (well deserved) bad reputation of being "spammy" and the second one is that the tool called Plaxo Pulse is a great hit.

Plaxo Pulse enables sharing of content from multiple different sources across the social web, including blogs, photos, social networking services, rating services, and others. It is based on Google’s open social container.

The down side is that they still do not have a good revenue model. The revenue numbers for Plaxo are hard to come by and that probably means that they are really anemic.

They currently have about 15M users (20M if you look at the forward trend and not the trailing trend).

The company has so far raised $28 Million in four rounds, from Sequoia & Ram Shriram (Series A; 2002 $3.8M @ $7.5M post), Globespan Capital (Series B; 2003; $8.5M @ $33.5M post), Cisco (Series C; 2004; $7M @ $64M post), and ; 2006; $9M @ $122M).

So, let’s talk about the valuation and how much would Plaxo sell for. I know, these could be, and in this case they probably are, different numbers, so let’s play the game as to how much do you think Plaxo is worth and how much would it sell for.

As a data point, remember that in 2006, DAG already valued them at $122M.

My take: at $5/non-paying user, it is worth about $75M max, and it will sell for about $225M. The $225M purchase price will be justified by saying that one should look at the forward extrapolated user base, and the expected improvement in the revenue, to come up with the current purchase price (!). Assume 25-30M users next year, that gives about $150M as the allocation for the user base and rest as multiplier for the potential revenue improvement. There is some double counting here, but what is a few tens of millions between friends?

Leave a comment if you have a different method of valuation or have a more creative way to justifying $200M+ purchase price.

3 Responses to “Let’s play the Plaxo valuation game.”

  1. By Mark Russ on Jan 5, 2022 | Reply

    Another company with inflated value can buy it for $250M . For example, facebook or myspace, they are valued at $10-$15B - its inflated but the inflation in the price of Plaxo comes from the same reason and so it is an even trade.

  2. By Executioner on Jan 5, 2022 | Reply

    What is the user acquisition cost for web 2.0 comaonies?

  3. By VC on Jan 5, 2022 | Reply

    Venture chronicle argues that if you take the per user valuation at $250 (as it was done for facebook), then Plaxo is worth $3.8B, yes that is B for billion.

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