Facebook Growth Analysis Failure
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Jeremy shares a story about how traditional quantitative analysis can miss the mark dramatically, using Facebook's IPO as an example.
"My favorite anecdote is from the Facebook IPO. Barclays put out this research report where they calculated what the business would be worth through a discounted cash flow analysis. Part of that calculation included the terminal growth rate - what the company would grow at forever - and they put it at 3%, which is standard for most companies. That got them to a $200 billion valuation.
The next 10 years Facebook grew 30% per year and became a $2 trillion company. They were off by an order of magnitude. It shows how all this modeling and research can be completely wrong. It would have been better to think fundamentally about how much Facebook could grow - what percentage of the planet could use this? That basic first-principles thinking would have been more valuable than complex quantitative analysis."
Jeremy Giffon
First employee and general partner at Tiny, a private equity firm acquiring internet and technology businesses. Part of the founding team of MediaCore, later acquired by Workday. Specializes in identifying esoteric opportunities and navigating misaligned incentives in private markets.