Pinterest is one of my favorite companies for obvious and not so obvious reasons. The least obvious is that contrary to popular opinion, Pinterest is not an overnight success and I was one of the first people to voice this publically on Twitter nearly a year ago. It resonated with so many people that it became my most popular tweet of all time with over 647 retweets.
I discovered Pinterest, the digital social scrapbook in June of 2011. Since I was a teenager, I had my own version of Pinterest. I always dreamed of building my own house so I would purchase home and gardening magazines, cut out the pictures I liked and pasted the images into a sketchbook. I still have the sketchbook on my bookshelf and pre-Pinterest, I loaned it to a friend who was designing her own house. I now lend my "Pinterest Boards" to friends planning weddings, getting engaged, and those throwing dinner parties. There are many who do not get the allure of Pinterest so allow me to describe what I think Pinterest means to some people (or at least what Pinterest means to me).
Pinterest is therapy. Pinterest puts you in transcendental meditative state. Pinterest is alcohol-free vodka. Pinterest makes your life more beautiful. Pinterest affords you a life where you wear an Ellie Saab gown to dinner and it does not matter if you spill ketchup all over yourself because you have a pink Versace gown you can slip into afterwards. On Pinterest you can cook a perfect chocolate soufflé, eat the entire thing and still have six-pack abs. Pinterest is a world where your significant other surprises you with a trip to the Maldives and then Paris, brings you fresh flowers from your bug-free garden, and writes you the most beautiful inspiring poetry. On Pinterest the house is always clean, the laundry room empty and you are an expert at knitting baby booties. Pinterest is a place where you learn about things like roasted potato stacks made in muffin tins. Do you know how many little different finger foods you can make using muffin tins? Who knew!
Pinterest has an incredible opportunity to become a center for social commerce. In recent months, I have purchased three products from my Pinterest boards of which Pinterest does not see a dime from these purchases. The news that Ben Silbermann, the founder and CEO, is raising another round of funding at a $2.5 billion dollar valuation came as a surprise to me as I am not entirely convinced that Pinterest can innovate fast enough. Since I have been using the service (close to two years now), the website and mobile applications have not changed much, if at all. The company has also been slow to give other companies and mobile applications access to their API. In May 2012, the company raised $100 million dollars at a $1.5 billion dollar valuation, which is the new arbitrary valuation for what seems to be every company with decent traction in the Valley theses day. Now, nine months later Pinterest wants to raise more money at a $2.5 billion dollar valuation? So what exactly did they do with the $100 million they just raised?
I was on Wall Street during the dot bomb in the late 1990s and again during the financial meltdown in 2008. It was not pretty to be sitting on the frontlines of two financial meltdowns. When I was attempting to raise a seed round for my own consumer good product in Silicon Valley, I only had an idea and no physical product except for some sketches and the investors I spoke with at the time were setting valuation caps for "my idea" at several million dollars. My startup also had a proposed revenue model and the same investors said, "Don't launch with revenue otherwise your valuation will be lower if revenue is too low." If revenue is low, doesn't that mean you do not have a sustainable business model? How hard is that to figure out? Their defense was, "Look at Instagram! It was worth $1 billion dollars and they did not have a revenue model. They must be doing something right!" Call me foolish but I rather have a $100 million dollar company that actually makes money than a $1 billion dollar company that prints Monopoly money.
So was the $1 billion dollar offer from Facebook for Instagram a mistake? Instagram was a threat and an opportunity for Facebook. I think it was a good decision on Facebook's part to acquire Instagram (final price: $715 million) but let's look at how the valuation for Instagram went down. Twitter had offered Instagram $525 million a few weeks before the Facebook offer. Facebook just doubled Twitter's offer. Here is a tip, when people throw out round numbers, don't believe their math. The Instagram story is not to be replicated anytime soon except with maybe that of Pinterest. If I were Ebay or Amazon, I would be watching Pinterest like a hawk and maybe, just maybe, Pinterest is raising more money as a way to fend off e-commerce giants so that the company can execute it's long-term vision, which I believe is promising. But I've yet to see Pinterest execute on the $100 million dollars they raised nine months ago so can't help but wonder where is this all headed exactly? As a power user of Pinterest, ship or die Pinterest but please ship because I have over 1,000 pins and I gave up paper and glue for you. Oh yummy, beautifully printed scrapbooks from all your Pinterest posts. You heard it here first folks but first Pinterest has to give you access to their API. Best of luck with that one.