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RE: How was skype valuation reached at?

saurabh.msh — Mon, 26 Mar 2007 08:30:43 GMT

hello doctor VC
i have a doubt, why yr reply is so late. if this is so, whatever somebody asks looses importance. answer should be prompt as u are doing a great job

RE: How was skype valuation reached at?

Dr. VC — Tue, 10 Oct 2006 20:12:07 GMT

I have it on very good authority that the Skype valuation was derived using an age old technique...someone wet their finger, stuck it in the air, and said, "Methinks it's worth $2.6 billion...US!"

EBay obviously thinks it will create far more value from the investment than $2.6 billion. They probably looked at the size and scope of their (eBay) business, and felt they would be be able to leverage Skype's technology, namebrand, and user base into a business that will some day have a value far in excess of what they paid.

But ultimately, as in all things negotiated, a price was tendered, a price was accepted, and that's how you create a market. A perfect market...Pierrre Omidyar must be so happy.

How was skype valuation reached at?

adityayadav76 — Fri, 29 Sep 2006 03:31:30 GMT

Hello Doctor VC,

I have come across an alum + friend from college who is into IM business. During my discussion with him he told me that even though firms are valued at 2x revenues. In the consumer IM business where revenues are negligible compared to the number of users the valuation is done by multiplying the number of users by a factor such as $40/user. He cited Skype purchase as an example.

Can you please explain how skype valuation was reached? (The maths behind it) I did search the internet but didn't find a satisfactory explanation. Want to ask the expert instead.

Thanks
Aditya
P.S. I admit I didn't search your forums if this question has been answered earlier. In that case please provide the link to the topic in the reply and accept my apologies on my inability to locate it.