Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
Oculus Rift
There a big uproar this week with Facebook buying Oculus Rift, a virtual reality hardware company that began with funding on Kickstarter.
The Oculus kickstarters got exactly what they overpaid for…an expensive t-shirt. A few got a prototype too. The Oculus owners got $2 billion in cash and Facebook stock (which they might want to insure).
Facebook got a lottery ticket in the next big thing. That’s the story.
Sure, you can make this about crowdfunding scams. How someone made billions on the backs of donors. Except, what the donors were getting was clearly defined. No where did it say they had ownership, equity, or a voice. It didn’t say Oculus couldn’t be sold either.
For crowdfunding this is big PR. It shows that it works…for the owners. They can turn an idea into a business, have no shareholders to answer to, and do it debt free. Instead of equity in the company, here’s a thank you and a t-shirt. Sounds like a good deal to me! (Though, the JOBS Act will change this, for the worse. People who do dumb things with their money, won’t become smarter with more equity available via crowdfunding.)
It’s not difficult to see where this goes next. More people promoting ideas with the hopes of starting a business and selling big. But there’s scrutiny that comes with news like this. You’ll hear stories of success and failures, mostly failures.
I’d venture to guess the company had no chance of competing without this buyout. Now at least they have the financial backing to go up against competitors like Sony.
So what does Facebook get? A chance to play catchup with Google and the rest of Big Tech for the next big thing. Maybe its virtual reality. Or drones. Or lasers. Or laser shooting drones. Or something else we haven’t dreamed up yet.
Smartly, Zuckerberg is taking advantage of Facebook’s lofty market cap to exchange shares for that possibility. The shareholders might disagree. But with tech companies, you get the business and a venture capital firm with the purpose of staying relevant.
Last Call
- Where’s Google going next?
- React to the Reality, Not the Image of It
- One-Sentence Financial Rules
- Robert Shiller’s Nobel Knowledge
- Shut Up Already! It’s Not 1929
