Rank | Company Name | Revenue Growth (2007-2011)

#1 | Tesla Motors | 279684%

#41 | BrightSource Energy | 3547%

#62 | Facebook Inc. | 2325%

#82 | LinkedIn Corporation | 1507%

#255 | Bluebeam Software | 320%

Congratulations to all involved!

Let’s face it, the public is getting bored of the monotone blue and grey website that promises us more updates about what our friends did today and what our acquaintances ate for dinner. The verdict is out: The cool kids aren’t using Facebook anymore. Instead we want to connect with people that share similar interests and passions, and that post and consume information that inspires us. In an increasingly visual world, we don’t even want to read 140 character bite size updates. Instead we want to consume beautiful images that are worth 1000 words. Users have flocked to Tumblr to post images that have meaning, but often without comments or links to sources. That limits the usefulness of Tumblr’s platform. Pinterest has clearly taken the lead in providing a valuable experience to people that create, curate and consume visual content but this industry is young and ripe for competition. We saw skepticism among venture capitalists when we launched a new comparison shopping engine called Smarter in 2004, but within a few years, we were the fourth largest comparison shopping engine in the US and had expanded to China and Japan. Now, we see an opportunity to carve out a meaningful share of the fast growing visual social market, and we are investing to win.

1. Did private marketplaces offer investors a good opportunity to purchase Facebook shares prior to their IPO?

A. Yes until Q4 2010. In Q3 2010, prices were ~$13 and increased to $30 by January 2011. The last 15 months prior to the IPO were not a good time on a risk adjusted basis to buy Facebook stock.

2. Are there still opportunities to profit in buying private company stock through private marketplaces?

A. Maybe, but not for companies that are hot, well known and advanced in their valuations. I think it would be difficult to make a compelling case for buying shares of billion dollar companies like AirBnB, Dropbox, Pinterest, Square, or Twitter.

3. How long will the current liquidity window remain open for often unprofitable and immature consumer Internet companies?

A. ??? but the underwhelming Facebook IPO, “The Patterson Cycle”, and slow economic recovery probably don’t help.

4. How will private company valuations be influenced by the Facebook IPO?

A. I think people will be more cautious.

Looking back on public pricing information from private transactions in Facebook stock at both Sharespost and SecondMarket, it is clear that there was a dramatic increase in Facebook’s share price in Q4 2010 just prior to the news was published that Goldman Sachs was investing in Facebook at a $50 billion dollar valuation. Investors who came in at $13/share in Q3 2010 have smiles, while investors in 2011 invested in the mid 30′s per share. My assumption is that the vast majority of Facebook purchases occurred after the Goldman investment (as ours did), and that Facebook was probably substantially overvalued (and may have been sold in the private marketplaces for higher than the FMV that Facebook used in valuing Facebook employee shares or RSU’s). This might suggest that opportunities to make money in private marketplaces are limited to investing in less well known names where valuation is still relatively opaque.

I completely agree that information asymmetry is a fundamental problem in the secondary markets, but I would argue that this asymmetry exists in public markets as well. While a public company has the fiduciary responsibility to make material information public and available to all shareholders simultaneously, there are legions of analysts who can employ their intellect to develop company financial models, do market checks on sales channels, speak with suppliers and competitors, attend industry conferences, and better understand the company than your average investor. In my opinion, there is no way that an average investor can generate an above market average return over the long-term based on better fundamental analysis. However I believe that there is still an opportunity to learn enough about a private company to have a fundamental edge over the average private company investor. I’ll give a few examples.

I first learned about the company, Chegg, from a report by Stephen Carpenter on TechCrunch. In his article, Stephen took a few pieces of public information and was able to model potential revenue for the company and demonstrate that the company was growing like wildfire and likely was already at a $100 million plus revenue run rate. It remains to be seen whether his numbers were accurate, but they were clearly directionally correct. Chegg later took the action of not listing how much they had saved students off list price on their website (which could be back-solved to identify revenue) and changed their policy of planting one tree for every book rented to one tree for every order made which also obfuscated their revenue and growth. I took Stephen’s analysis one step further by looking at all of the top books rented on their site, and calculated how many times Chegg needed to rent their book out before breaking even, and was able to identify the average life of a textbook before a new edition was published. Much like GoTo.com before it, Chegg’s model was completely visible to anybody who visited the website. We ended up buying more than 1% of the company.

In the case of Tesla Motors, I was able to ask questions at the car dealership to determine that the company was producing 25 cars a week by the summer of 2009 that were being sold with options for considerably more than the base price of $109,000 each which suggested that Tesla was at a $100+ million revenue run-rate. That combined with a slightly misleading press release (that has since been taken off the website) from Tesla Motors in August 2009 that Tesla was profitable for that month encouraged me to invest and buy about 0.5% of the company.

Secondary markets remain opaque and information asymmetry will not disappear anytime soon. An investor that has a fiduciary responsibility to limited partners will generally not be able to obtain the information they need to make a buying decision unless they have insider information, or will not have the time to do their analysis before another buyer completes the transaction. This suggests that there remains a limited window of opportunity for people that are comfortable making substantial financial decisions on limited information quickly.

Over the last year, we have sharply reduced our investments in Greentech recognizing that although we have done well with Tesla Motors and SolarCity, we fundamentally don’t have the in-house expertise and experience to make large investments in this space. Instead we are turning our attention much more to Consumer Internet where we have the capability to make educated bets.

BeachMint combines the business model of direct to consumer subscription ecommerce with celebrity promotion and social marketing across multiple channels including jewelry, shoes, women’s fashion and beauty products. BeachMint recently raised $35 million led by Accel Partners, with participation from Goldman Sachs, New World Ventures, Millennium Technology Value Partners, and other previous investors. This brings total funding to date to $75 million.

LoveIt is a well funded start-up in the image discovery and collection space. While Pinterest has achieved amazing traction in building consumer traction for its’ pinning product, we believe that there are a number of product innovations that could allow LoveIt to grow even faster, and provide more value to users. A public launch should occur mid 2012.

SpaceX is the first privately-funded company to successfully launch, orbit and recover a spacecraft. The future for space transportation will include private companies, and we expect SpaceX to be a leader in transporting both supplies and humans to the International Space Station, launching satellites, and beyond. Founded in 2002 by Elon Musk, SpaceX has over 1250 employees and has been profitable between 2007 and 2010.

StyleHaul is the #1 channel network on YouTube for style, fashion, beauty and shopping related content with more than 25 million unique visitors each month.

At the end of the presentation by Elon Musk, there was an opportunity to make a $5,000 or $40,000 refundable reservation before reservations became available on Friday at noon to the general public. I had to get in line to make a reservation and probably had at least 30 people in front of me. I suspect this will be the fastest selling car in the Tesla model line-up, and the stock price should react favorable, but the stock was down almost 10% at one point this morning. I bought some Tesla calls and wrote some puts this morning and suspect that we should have a near term announcement that reservations for the Model X were larger than expected.

The falcon doors were a hit.

The lines are very similar to the Tesla Model S

Tesla was giving rides to reservation holders in the Model X

The adults in the third row appeared to be comfortable

Room in the front trunk for a pair of ladies

Update: I received reservation sequence number #16 for the Tesla X.