Jun.28, 2012 | 5:36 AM–Another Israeli start-up bit the dust last week.
Of course, that’s not how it was portrayed by the company or by the media. Long pursued by Facebook for its technology, Face.com was finally acquired by the social-networking behemoth for a price variously estimated at between $50 million and $100 million.
The price was probably closer to the lower end of the range, but even that would be a good return on the time (three years of work by fewer than 20 people ) and money ($5.3 million of capital ) put in by the company’s founders, investors and employees.
Face.com was in the business of developing cutting-edge technology that can recognize faces from photos uploaded to the Internet. What could its purchase by Facebook be, other than further evidence of Israeli genius, the bounty that start-up nation Israel has bestowed on the economy and an inspiration for young people?
Deals like this smack of the Klondike gold rush, or wildcatting for oil in Texas. You come up with an idea, raise some capital, hire some programmers to put it to work and hope that after a couple of years someone will recognize the results – which these days in inevitably some kind of mobile application – as a big enough thing to warrant buying you out for tens of millions of dollars, or more.
In Face.com’s case it was the fortune of Facebook’s relentless pursuit of new come-ons for its social networking site, its move into mobile and its strategic decision to pursue the area of photos and images.
The downside, of course, is that you could be beaten to the punch or find yourself going after an idea that has no traction, and end up with the digital equivalent of a dry well. But as a business it isn’t bad. Venture capital basically works on this proposition – invest in a portfolio of start-ups and count on a couple of big hits to make up for the misses…Read More>>