Three Kids and an Iguana

Joel had an interesting take on start ups

The one thing that so many of today’s cute startups have in common is that all they have is a simple little Ruby-on-Rails Ajax site that has no barriers to entry and doesn’t solve any gnarly problems. So many of these companies feel insubstantial and fluffy, because, out of necessity (the whole company is three kids and an iguana), they haven’t solved anything difficult yet. Until they do, they won’t be solving problems for people. People pay for solutions to their problems.        

There’s been a lot of talk lately about a another bubble, and it definitely feels this way. Everybody is following in Facebook’s footsteps to be open. Even fighting each other to see who can out open each other (re: OpenSocial, Verizon’s Open Network, etc.)I was discussing with a friend about the whole Facebook Apps thing… Look at these two graphs of an app called Drink Recipes on Facebook (taken from adonomics.com)

Daily Active Users
dractive.png
Valuation
drvalu.png
Someone explain to me how the valuation is an inverse relationship to active users? There’s also a third graph of installs, but it’s can’t be based off that can it? Active users can be synonymous to daily page views, which is how most sites base their valuations off of. The current valuation of Drink Recipes is $1.45m, mind boggling considering 3 kids an an iguana or two could have made it…. I guess the key is to be one of those kids (or maybe a RoR coding iguana?)

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2 responses to “Three Kids and an Iguana”

  1. Jesse Farmer says:

    Hey Wayne,

    DAU is a bad metric, but we do our best to get what we can out of it.

    One reason is that both new users and returning users count as “active users.” By trending the metrics over time we can separate these two numbers out.

    As for that graph specifically, that’s definitely not an “inverse” relationship. The valuation is going down because the applications rate of growth is decreasing and part of the valuation is based on the size of your application in N months.

  2. […] off, no more start ups getting inflated valuations for putting a website (see crazy valuations of facebook apps). On the other hand the economy seems to be going to hell in a hand basket and most startups are […]