Michael Moe says Facebook is worth $70 billion, and that valuation has Wall Street standing at attention.
Moe is the chief executive of GSV Capital (NASDAQ: GSVC), a publicly-traded, closed-end mutual fund. You may not have heard of them until recently, when the news broke that GSV purchased 225,000 shares of the world’s biggest social network at an average price of $29.28 per share. That share price puts Facebook at a valuation of about $70 billion, up from $50 billion in January 2011.
“We’ve been a well kept secret,” said GSV chief financial officer Stephen Bard. “We didn’t know what to expect after we made the announcement. All we knew was we really believe in what we’re doing.”
What GSV is doing is providing all investors, not just accredited investors, with a crystal ball of sorts, revealing the future of what a public valuation of Facebook shares could be. (Private markets that track Facebook shares have estimated that value could be about $85 billion, according to CNBC.)
Michael Moe has experience in these sorts of premonitions. It was Moe, after all, who became famous in 1992 when he predicted Starbucks Coffee was going to become a global superstar. He subsequently authored a book: “Finding the Next Starbucks.”
Moe, who lives on the San Francisco Peninsula, is well-known in Silicon Valley. He’s pretty busy today, as you can imagine, so CFO Bard filled us in on Moe’s financial foundation. Moe has more than two decades of experience in emerging growth companies. Before GSV, Moe was co-founder and former chairman of investment bank ThinkEquity Partners. Before that he was head of global growth research at Merrill Lynch. Before Merrill Lynch he was head of growth research and strategy at Montgomery Securities in San Francisco. Moe has been a research analyst, investment writer and, his most recent title, fund manager. Moe also knows IPO’s. GSV went public in April 2011, raising $50 million.
“The financial ecosystem has changed dramatically in the last few years,” says Stephen Bard, CFO for GSV. “Michael has created an investment vehicle that is the first of its kind. There aren’t too many people who can claim to be pioneers, but Michael can. GSV has created a publicly traded, liquid, and transparent portfolio that gives access to a very exclusive terrritory. We’re democratizing the space that was once only available to accredited investors. We’re making private, venture-backed growth companies available to all investors.”
Facebook now accounts for 15 percent of GSV’s portfolio. The only other investment that the company has announced is a start-up called Kno, which provides textbooks for iPad and its own custom e-book readers, and is a potential diamond in the rough. Kno is small, but could get big. It’s the kind of startup GSV has said from the beginning it wants to invest in.
Only two publicly-disclosed investments is not many for a publicly-traded investment firm, however. Bard stresses that these are the only two companies GSV has announced, a clue that others are in the works.
“We announce our investments as soon as it’s practical,” says Bard. “Some companies take longer to announce. Facebook and Kno just happen to be the first we were able to announce. While they are in very different stages of their lifecycles, they are both very compelling growth stories. We’re also trying to find the next Facebook while riding on Facebook’s success. Basically we look for companies that will generate returns for our shareholders. So it’s not just finding the stock, but buying it at an attractive valuation.”
Those sorts of companies will be easier for GSV to find, now that the Facebook valuation has helped get them on the VC radar. Bard anticipates that once the cash is fully deployed, GSV will be a diversified portfolio with interests in 20 or more companies, obtained through secondary deals as well as primary direct investments. GSV will target companies between $100 million and $1 billion in valuation, with revenue growing at more than 40 percent annually.
As far as what types of companies are in the GSV pipeline, Bard gave us a hint at what’s to come.
“Besides social media and education technology, we’re also interested in mobile computing, the cloud, software as a service and green technology,” he said.