Zillow to IPO?
John Cook, VC reporter for the Seattle PI, put out his 2007 predictions column today. Interviewing a number of Puget Sound venture capitalists, he predicts that Zillow will attempt an IPO.
That’s pretty bold speculation, but not far off the mark, the more I think of it. Zillow’s investors (Benchmark Capital, Par Capital Management and Technology Crossover Ventures) have dumped an enormous amount of money into the company and I’m still not convinced that their advertising model alone can recoup their startup costs and tackle what’s got to be a huge monthly burn rate.
There’s no doubt that the investors will be looking for a payoff on their $57 million investment at some point, so the question is will it be come from an IPO or an acquisition?
But then I guess the bigger question is, if Zillow IPOs, would you buy?
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Incredible Agent | Jan 19, 2007 | Reply
IPO!? Didn’t we learn anything from ‘99? I would have to believe they have a rock solid, long-term, industry adopted financial model before I would even considered investing. They have yet to prove that to me. Until then, I’ll be waiting on the fence watching to see how it all shakes out.
mike | Jan 19, 2007 | Reply
Well, that doesn’t suprise me. Venture firms, have to get a return on capital and provide liquidity or the money will go somewhere else… currently hedge funds run guys with more guts than brains are raking in the $$$.
Revenue? Who needs that… they have a good story
Tony Arko | Jan 20, 2007 | Reply
Without a look at the numbers and how bad the burn rate actually is, it is hard to say one way or the other. If they are growing at a sustainable rate and there is a light at the end of the proverbial tunnel, ie. a profit, then they could be a good speculative stock. They might not have a great product but they are very “sticky”. They have a pretty good PR machine in place.
Jesse Barron | Jan 20, 2007 | Reply
I sure wouldn’t buy any shares! How in the world are they going to make enough money? At most, their concept is probably worth less than 15 million a year in ad revenue? Maybe a little more? They surely won’t make enough to keep their investors happy!
What amazes me is how a company that buys some data and publishes a Web site can burn through so much cash.
I am co-owner of a company that probably has more revenue than Zillow. Our total initial investment? $500.00. Time to profitability? One month.
If I had $57 million to start or grow my business, it would surely be a household name by the time I spent that money. Zillow is not yet a household name, even though there has been considerate media coverage.
I may be slightly bitter, but it is saddening to me that a tech company can get $57 million based on an idea, yet I have to jump through a million hoops to get an expansion loan for my profitable venture, which operates on a 70% profit margin.
Based on the decisions some of these VC’s make, it makes me wonder how they were smart enough to earn the initial money required to become a VC!
Jesse Barron | Jan 20, 2007 | Reply
Typo! Not a 70% profit margin. I only wish!
I meant 40%. Not the best out there, but still very respectable and it demonstrates that we are good at keeping costs in-line.
The 7 key is right on top of the 4 key!
mike | Jan 20, 2007 | Reply
VC’s are just playing the game. Its like a pyramid scheme. VC put up some $ on a nutty idea from a guy from Stanford. Pump up the volume on the business model, IPO sell their enough of their holdings into the market to get a decent return on their invested capital and leave the rest on the table for upside if someone eventually figures out how to make money at the company. Remember WebVan?
John Cook | Jan 22, 2007 | Reply
Thanks for linking to my story. I always enjoy your blog.
Just to be clear, I did not predict that Zillow would go for an IPO, one of the VCs that I interviewed did.
John Cook
Shuki Haiminis | Feb 10, 2007 | Reply
I think that the direction that the guys at Zillow are taking is the right one. I think it may be a bit early for an IPO though. I know Zillow is becoming used more and more everyday but I don’t think it is just yet a common household name. Once that happens it will be time for an IPO.