Search

You can’t judge Business Insider’s value by its investors

Mar 17, 2014

FORTUNE -- Earlier today, USA Today media scribe Michael Wolff wrote a pretty bearish column about the future of business news website Business Insider -- suggesting it may be a "house of cards," thanks to "ever-increasing traffic costs and ever-lower returns."

Now I have no idea if Business Insider will ultimately succeed or fail, but I do know that at least one of Wolff's assertions isn't necessarily true. In writing about the company's recent round of new venture capital funding, Wolff writes:

Its $12 million in new money comes from existing investors — Amazon.com founder and CEO Jeff Bezos among them — meaning everybody merely contributed more money to keep their present ownership stakes, without raising the value of their shares.

Yes, it is possible that existing investors all participated at the exact same company valuation as they did last time around. But it also is possible that they invested at a higher valuation (or at a lower one). Higher valuations are not the exclusive result of bringing in a new investor. Nor do insider rounds mean that everyone kept their present ownership stakes.

For example, take the recent high-profile case of Sequoia Capital and WhatsApp -- where Sequoia was the company's only venture capital investor through three rounds of VC funding. Does Wolff think that WhatsApp received the exact same valuation from Sequoia during each funding round, until Facebook picked it up for $19 billion?

To be sure, I can't fault a media reporter for not knowing all the intricacies of venture capital. It's not his job. But you'd think someone might have looked this over. Or, you know, run a clarification after Business Insider wrote: "The price of our recent investment was much higher than the prior round. One of our investors also significantly increased its stake in the company."

As of this writing, the original column language stands.

Sign up for Dan Primack's daily email newsletter on deals and deal-makers: GetTermSheet.com

All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website.

Quotes delayed at least 15 minutes. Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions