A million dollars isn't cool. You know what's cool? A billion dollars.
The words made famous by the movie that dramatized Facebook's beginnings may soon be passé in Silicon Valley, as investors clamouring to get in on funding rounds for the hottest tech startups seem increasingly willing to put their cash in at billion-dollar valuations.
Crazy? Perhaps, but Facebook's $1bn Instagram acquisition shows that big valuations don't exclude companies from the startup lottery, at least for the time being.
The latest entrant to the billion dollar club will be Pinterest, thanks to a $100m funding round led by Rakuten. The funding round puts a $1.5bn valuation on Pinterest.
Rakuten Ichiba is the largest e-commerce site in Japan and among the world's largest by sales. The compaby has recently acquired Buy.com in the US, Priceminister in France, as well as Play.com.
According to Raukten CEO, Hiroshi Mikitani:
While some may see e-commerce as a straightforward vending machine-like experience, we believe it is a living process where both retailers and consumers can communicate, discover, and curate to make the experience more entertaining.
We see tremendous synergies between Pinterest’s vision and Rakuten’s model for e-commerce. Rakuten looks forward to introducing Pinterest to the Japanese market as well as other markets around the world.
Although Pinterest is one of the hottest new social media players to emerge in recent years, and is, according to Experian, the third largest social network in the United States, some will naturally point to a $1bn valuation for Pinterest as further evidence that we're in the midst of a huge bubble.
Yes, such a valuation would appear to be frothy, but if there's one hot startup that everyone agrees has the potential to develop a solid revenue model, it just might be Pinterest.
Many of the images that Pinterest's users are pinterested in are products, and the company has built an audience with a very appealing demographic. For online retailers, that's apparently translating into more than just potential. According to a recent report, Pinterest revenue per first click beats Facebook and Twitter by 27% and 400%, respectively, making Pinterest a potential game-changer for social commerce.
The big question for Pinterest is how well it can execute a monetization strategy. The company must take care in adding commercial aspects to the service, lest it upset users. And the social media darling will want to ensure that the backing doesn't limit its potential to work directly with all retailers.
If it can do all this, the future would appear to be bright for Pinterest. Whether the company's possible trajectory justifies a $1bn-plus valuation is another matter altogether but for the Pinterest team, taking advantage of the current market conditions to obtain such a valuation is probably pretty cool.