Social network platform Ning joined Slide in the Half Billion Dollar Club by raising $60 million (after banker fees) on a $500 million pre-money valuation. Like Slide, Ning used influential investment bank Allen & Co. to represent them in the deal.
Venturebeat broke the story based on a perusal of SEC filings, and we’ve confirmed it with Ning co-founder Marc Andreessen. “We have raised about $60M net at $500M pre from a set of institutional investors (who we’re not naming, since they said they’d prefer privacy, which we’d like to respect),” he said in an email.
Andreessen on how they’ll use the money: “We raised the money to enable us to keep scaling given our accelerating growth (over 230,000 networks on Ning now, growing at over 1,000 per day) and to make sure we have plenty of firepower to survive the oncoming nuclear winter. At current growth rates, we don’t need it to get to cash flow positive, but having lived through the last crunch, it’s good to be conservative with these things.”
The timing of this is great for Ning – they’re also the subject of a beautifully uncritical fluff piece in this month’s Fast Company that talks about “viral expansion loops.”
Ning has now raised over $100 million.
That’s both a good & bad sign for the economy on the whole. The institutional guys are betting that Ning continues kicking it, while MA is hedging against the economy tanking.
Both are smart plays for the obvious reasons.
Just not sure I can believe that Ning is worth half a billion… am I missing something?
Nuclear winter?
…that’s not encouraging
my day is split 50/50 – 1/2 on ning networks and 1/2 viewing slide widgets.
Absolutely amazing how these valuation deals get done. We, in the cleantech, are facing much more rationale valuation but the fade will pass, at least I hope
Still, very encouraging for this growing segment.
Ning is just a “social network script”. The difference of this with other open-source scripts is they also use it. There is not a web 2.0 excitement here! i’m sure i dont miss something, Ning absolutely can’t woth half a billion.
You can have a pretty slim idea and execution to get to .5 billion valuation nowadays.
Will Ning ever make money?
I can see dozens of competitors swooping in to give the same value for free if Ning tries to do a bait and switch in terms of charging for their services.
Here comes another dot com crash.
Only 2% of Web 2.0 are real businesses with real models anyway.
Free is NOT a model. A buyout is NOT a model. Advertising is a POOR model.
Stop inventing and start innovating. There is a difference.
Ryan,
No. You aren’t missing anything. Ning (haven’t even heard of it) is worth whatever people believe it is worth. Half a billion my ass.
My car is worth 2 billion. I got drunk with a bunch of vc buddies of mine and they agree because they gave me a check for $100 to confirm their opinion.
i think findatop.com is a great idea and will beat every other buisness networking site out there
oh sweet jesus yes! ride baby ride! every ridiculous valuation is good baby! be happy guys!
wooooooooooooooooooohooowooooo!
Netscape!
And I thought my understanding was minimal….
Have you all ever heard of SalesForce? It is a platform targeted at building business applications on top of their service.
Ning is not just “some script”, my understanding is that their goal is to build a platform for application developers much like GooGAppEngine, but more integrated. These app developers will have more functionality than facebook app devs, and be able to sell their apps to those that have Ning apps?
On second thought, this might confuse some fo you, forget it.
I like Ning. I wish they would add a way for me to charge the users for access. Then Ning and I could do a rev share. Six years ago I launched a successful product called http://SubscriptionKit.com its a membership site without content. Ning would be a fantastic online version of this strong revenue stream. If the Ning team needs help give me a call 415-750-1921. http://lambright.com
I wonder what Ning would be worth if Andreessen quit tomorrow? IMO Ning and Mahalo goes to show how much investors in today’s market value previously successful entrepreneurs
give me a break frank, everyone can write a social network and a code munger for your own DSL in like 71 minutes + screencast
Netscape!
……”$60M net at $500M pre from a set of institutional investors (who we’re not naming, since they said they’d prefer privacy, which we’d like to respect),”…
Let me help translate Marc’s email. It goes something like this.
“Since we signed the paperwork and received the wired funds into our Ning bank account, we have had some of these institutions have buyers remorse. I mean after all we have negligible revenues and really don’t offer much value. That said, we’d like to again thank the morons at these institutions for being suckers. Have a nice weekend.”
How can VC’s value the platform for that price?
I am still trying to figure the FM 200m valuation while watching publicly traded companies like MIVA ($150 in revs) and LookSmart ($75 mil 08 revs.) both currently valued at under $100. m market cap.
It’s their money and I guess they can bet it any way they want.
@Anonyjoe, Great, Let’s clone Salesforce and charge a third the cost. Do you know what that public company is worth? 71 minutes? (shit we can take over the world at that pace). We should be done by monday I’m sure, and we can launch wednesday and have 60% of the Salesforce marktet by end of year. Awesome!
Didn’t you know that Ning is a double loop spiral…check that….make that double loop viral play ?
Peggy Fleming would be proud.
Yes this is the spin from the mouths of the co-founders
LOL on the sucker play !
frank,
sales force spends 30% of their revenue on sales and marketing, its app tone that is important not the shitty app. Furthermore sales force CHARGES for use of their ‘Platform’ , I hope u are not using it you will need to save your dollars to buy a clue.
$500 million is a lot. And I barely get this web stuff and didn’t understand a thing in that FastCompany article. Is Viral Loop the same as viral.
But what you techno fellas do not understand is how valuation works. It’s not actually $500 million the way you think of it. For instance, if Ning sold tomorrow for $106 million, all of the existing investors would actually have made a profit. How’s this, you ask. It’s called a liquidation preference…meaning all investors get their money first ($104 million) before the remaining proceeds are split on a percentage basis. So they will get all of their money back. What do you think the chances are that Ning will eventually sell for less than $104 million?
So, when the investors put in the $60 million, and with this $60 million, Ning has raised $104m, the real risk is this: What is the likelihood that Ning can be sold tomorrow or in the next year for $104 million. Very, very high. If that assumption is true, the risk of loss is very low. For assuming the risk that the liquidation value will be less than $100 million, the investors get 11% of the upside beyond the liquidation preference.
So people can invest at $500 million valuation, but still make money on a $150 million exit or $250 million exit or $350 million exit. I would go on, but you technoguys are really good at math even if your finance is a little off.
I think Ning is worth it.
Now i am wondering why google hasn’t been rumored to be buying it yet.
Ning + gMail + gTalk + gApps + Android + Skype(maybe) = Crazy Delicious
The only question is, would they have to rename is Ging?
jddavis , good entry.
When I operated a startup in Canada, I was always against questionable valuations. Now that I am in So Cal and I am actually participating, I no longer see a problem with it.
Value is in the eye of the beholder. If it wasn’t there would be no such things as luxury goods.
its always amazing when companies like Ning raise huge amounts like this. 104 million ? only in an internet company investors lose their minds and bet. This would never happen with a bricks and mortar company.
All these kinds of companies have going for them is the high valuation. They’re preparing for another eventual big round of cash infusion, and a high valuation is the only way to get it without diluting themselves to nothing.
Bottom line is that they’ve hedged their bets on a boom or bust and want to ride it out as absolutely long as possible…
Those comparing this to Salesforce.com must not remember that
SForce will be at the $1 Billion sales mark by next year.
$1 Billion sales. Real money.
Not sure about the $500 mil evaluation, but don’t underestimate the potential of the Ning platform. I’ve put together 90% of a pretty killer social network in less than 48 hours. That includes support for individually themed user pages, photos, videos, streaming and downloadable music, blogs, forums, etc. Photo, music and video widgets are portable for embedding on Facebook or MySpace, photos can be sent to the network by phone, and everything is RSS enabled down to the tag level. And all of that without touching a line of code.
For a reasonable fee, you can run your own ads and remove the Ning branding. And after about an hour of tweaking CSS (not rocket science) and changing one character in an XML file (literally from 0 to 1), I now have a fully functional Amazon aStore running as well.
(Axepix is still in Beta, like I said, it’s less than 48 hours old.)
The trend in the music industry is for big stars, followed by littler stars, to begin building their own social networks. Madonna, 50 Cent, Good Charlotte and others are leading the charge there. And I think we’ll see more and more of these micro-communities popping up around everything from books to movies to soda companies.
And Ning, being the largest, cheapest, and easiest to use fully-functional platform enabling all this is leading the space. As Mark posted here last July, “Ning currently provides by a wide margin the best platform for setting up fully functional and visually appealing social networks from scratch.”
@jddavis
I’m happy to finally see someone who understands business. If anybody doesn’t understand it now, please stick to what you do best and let the business people do what they do. I think some of the techies get too caught up in their own little world sometimes to understand these things. I am new to the tech world but I understand the way the internet works. I believe the future success of most businesses will rely heavily on technology and that is why I read this blog. But sometimes the stuff that is said around here makes me understand why tech people need businessmen just as much as we need them.
Ning is worth it.. freaking Facefook is $15B, thats the outrage not ning.
as soon as people are sick of facebook the next fad will be ning, I would rather be in a closed network of people that share the same interest not in a sea of losers that want more and more friends.
Andreessen and Biancchini used to date? Gnarly!
people forgot about yahoo groups…if they slap customization, social networking features in it, it becomes freaking ning’s daddy….how r these VCs valuing so high for same ideas played out in web1.0
Well, im surprised but to tell you the truth, internet is turning to another thing and shit web2.0 is the bomb!
@29 Big LOL at you!
@16 Mike
Exactly right. There is a disconnect in what these start-ups are getting vs what the market is valuing established companies. I think once the hype wears off these companies show exactly how inflated most if not all the recent buys have been.
Public internet companies like MIVA, Looksmart, and Answers.com have become so tired that no one cares anymore. Take Answers.com, their main site is getting beat up by Wikipedia, but their WikiAnswers site was the fastest growing site of 2007 (ComScore) yet they are valued at 30 million, close to 17 times less than Ning.
A fresh story is worth a whole he77 of a lot.
and, post-money, now moving forward to worth more… congratulations!
@#20 (jddavis), if the investors bought their shares today at valuation of $500 million, and the company was sold tomorrow at $100 million, they lost 4/5th of their investment overnight.
There is no ‘outside investors get paid first’ rule in corporate law for equity owners.
@20 Best comment so far, but the more interesting thing is that the common shareholders will probably only make money if the company gets acquired for a fair bit more than $500M, since the preferreds are probably guaranteed at least a 1.5x return. Who are the common shareholders? Management and employees. I’d have to guess that the assumption is that Ning would be bought for at least $600M.
how standard is it not to disclose the investors? what’s the reason for that?
I am one of those that couldn’t make sense of Ning at first. But the double loop thing makes sense to me now.
I think I can decipher the fluff piece:
viral loops = porn
automagically = porn
Does anyone know Ning’s financials? The growth of their user base is impressive, but that does not necessarily translate across the board. Ning provides a nice service, but I don’t know how the company will be sustainable. Based on their platform and their fee structure, any serious business will probably opt to create their own solution. I only see Ning as appealing to casual and non-technical users, much like the blogging platforms of today do. So, assuming that the majority of site owners who use Ning will consist of the bloggers of today, can Ning make money based on their current fee structure?
1. Ning charges $4.95/month for domain masking. Now, this fee is insulting considering that domain masking can be set up in under 5 minutes. In any case, while I do see some users opting for this feature, based on the comfort of users to operate personal sites under domains like mysite.wordpress.com, I don’t think the majority will, and therefore do not see this as generating serious revenue for Ning.
2. Ning charges $7.95/month to remove their branding from the top of your page. The removal of Ning branding in the header bar will not be necessary for most casual users and I doubt many will pay a premium to see it gone.
3. $19.95 ad buyout. I don’t know all of the terms considering the ad buyout, but at $19.95, it looks like Ning is setting themselves up to get rolled. Most casual users will not generate enough traffic to opt for this feature, so Ning will be left earning pennies off of adsense ads that no one will click on anyway. If someone does happen to build a popular site on Ning, I imagine they would opt to pay the ad buyout fee and run their own ads. Therefore, Ning will be getting $19.95/month while the site generates serious monthly bandwidth costs (photo/video/audio) that offset the buyout fee. But, Ning charges for bandwidth…
4. $9.95 for 10GB storage/100GB bandwidth. Not so awful considering you are getting a hardcore managed server farm and akamai distribution, but also not very good. Sorry, but I just don’t see the casual user reaching a level of bandwidth that would exceed 100GB/month. There will be some sites that need to pay overages, but can Ning sustain their entire business based on the revenue generate through edge cases?
Unless bandwidth becomes cheap as hell, I just don’t see how Ning will be able to bring in enough revenue to sustain their growth. I think the service will continue to grow in popularity and imagine that soon everyone will have a Ning site just like they have a blog, but I don’t get the business model. Can a business as large as Ning really survive off of money generated through adsense ads?
Seriously, Arrington. These April Fool’s jokes are getting ridiculous! It’s the 18th for Chirst’s sake. $500 million for a POS company – ha ha ha! You almost had me going until the “won’t disclose investors” – like they’re too embarrassed to admit it. That and the “viral expansion loops”.
@35..NEO…
You are confusing the case of common stock and preferred stock. Ning is a private company. All venture investments are made and held as preferred convertible securities until and unless the preferred shareholders convert to common stock, which usually happens upon a public offering. All common stock is equal, but Ning’s investors don’t own common stock.
@35 The T&Cs of the deal can – and do – spell out very specific liquidation preferences for each series, which generally maps to a class of stock.
As I stated in the first comment (@1), this is an example of both sides of the deal essentially betting on different outcomes. Ning raised now because of the very real possibility that the capital markets (at this level) are going to tank.
Here’s why Marc raised this much and did so now.
Ning’s background page indicates they have 42 employees. If you assign an average of $120k total annual cost of each headcount, people alone are costing $5.04MM /yr. Add 30% of that (fair, could be higher) for capex, G&A, and other expenses, and your burn rate is near $7MM. Just to keep the lights on. If they pay their team well, this only goes up.
With a free service, that’s an expense total that you want to be able to cover for *long* time. Andreessen is smart, make no mistake.
Alex H -
Advertising isn’t a poor model. Advertising WRONG is a poor model.
So you’re saying that $60 Mil buys 3.5 Million Uniques per month?
http://www.tech...d-to-the-right/
Wow. No wait, wow.
All the bullshit about half billion valuations, common stock, preferred stock, is just that… bullshit of the highest order.
Point is that they have to be raising money for operations, which are not that large. 3.5 million uniques are not hundreds of servers running PHP. There is no business model in there… earnings must be pretty small.
Don’t get me wrong, I really like Andreessen, and the concept of Ning is a laudable goal, but its not worth investing $60 mil on a .5bil valuation, not at all.
Preferred shareholders get dividends paid before common stock.
If you own convertible bonds, you’re talking about debt financing and that debt has to be converted to common stock before you can take proceeds from the sale of company’s common stock.
Thus, you’re still talking about selling common stock in the case of selling the company, which means everyone is paid according to their ownership in the company, not if they held preferential convertible debt or other derivatives of common stock beforehand.
@43, that’s good to know, the limited amount of situations I’ve been involved do not spell such preferences, but I guess contract law would allow such conditions easily. No worries, mate.
Of course Mark Andreessen is making a smart move loading up in a recessionary environment. Of course he’s making a smart move now that he’s raised his pot of cash by talking about “Nuclear Winter.” I too would try and make it a lot harder for competitors to raise money.