THE

BIG 5

What is the “Money Network”?

“Network” here signifies a web, – a web of relationships. The components of this web are linked to each other by the thread of wealth, flow of money, from one component to another. Certain components create wealth (the big whiz entrepreneurial brains of the tech world), and certain supply wealth (angel investors, venture capitalists, banks) , whereas the others merely signify professional relationships (founders and co-founders, current or former employees). Because of this exchange of wealth throughout the network, this is called the “Money Network”. Another reason why this is a network is because all these people involved have basically worked among these same companies, carrying different positions at different points in time.

What is special about these

companies? Why are “these” a

part of this network?

Well, this network signifies what they are referring to as the “social media bubble” which simply means that these social media companies have a huge albeit sudden spurt of growth (that may or may not suffer a drop as sudden) and most, if not all investors are going bullish on them right now. There’s a famous phrase in Italian “carpe diem” which means “seize the moment” , and this is exactly how most investors are going about investing in these companies. They are thus fuelling huge amounts of capital (which is further helping these companies to grow, in quality and financially) that they hope to be able to reap with even better returns.

What is the customer base of

these companies?

These companies have a MASSIVE customer base. For the first time, start ups today are thinking of a Total Available Market in BILLIONS! And this is because – • These websites/apps are accessible 24/7 • Can be accessed via WIFI/3G services • Can be accessed anytime, anywhere • They provide a great medium to their customers as a means of point-

to-point as well as mass communication • They have a multitude of applications ranging from entertainment to

work-related platforms. • Age bracket (5 to 70+)

This is an extract from an article in NYTimes showing how these websites/apps grow. Today’s start-ups create “real revenue” and have all the tools needed to create real revenue, and large networks of users for a short development cycle and rapid customer adoption. They can actively engineer for an acquisition. Here's how:

Wide Adoption. Start-ups that win in the bubble will be those that are

widely adopted (using freemium, viral growth, low costs, etc.) and massively distributed (i.e., think Facebook, Android and Apple app stores). They will focus on getting large user bases first, and let the revenue follow later.

Visibility. During the last 10 years, the advice was clear: focus on building the company and avoid hype. Now that advice has changed. You need to focus on customers for your product, but you and your company now also need to be everywhere and look larger than life. Show and talk at conferences, be on lots of blogs, use social networks and build a brand. In the new bubble, P.R. may be your new best friend, so invest in it.

LinkedIn is a business related networking website, which was launched in

February 2002.

Used for professional networking, it has over 150 million registered users in

over 200 countries/territories.

It was founded by Reid Hoffman and a team of founding members from

PayPal.

This website provides job listings, alongside giving a brief about the company

and its statistics in terms of the workforce, location and job profiles.

It allows users to converts business cards into contacts through its mobile app,

thus providing ease of access.

It allows members to embed their latest blogs into their profiles.

It supports formation of interest groups, regarding career advice and employment

issues. It also provides a platform for both academic and corporate alumni

TOP 5 SHARE HOLDERS – as of 23rd May 2012 – LNKD (in $)

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Hoffman Reid Moritz Michael J SC XIManagement

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Price and T RowAssociates

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JennisonAssociates LLC

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It is a social networking service, owned by Facebook Inc. It took off

in February 2004.

It was founded by Mark Zuckerberg with his college roommates and

fellow students Eduardo Saverin, Dustin Moskovitz and Chris

Hughes.

Factbite - Facebook has 900 million users as of May 2012, more

than half of them accessing Facebook via mobile devices.

Facebook is mainly about connecting with people, social

interaction and entertainment and games.

It has been widely used to promote events, products, causes etc.

through a multitude of contests which usually include polls taken

via the “like” tool that it provides. The higher the number of

people liking a particular page, the more revenue it generates.

They also advertise in the form of pop-ups, the occurrence of

which is usually based on demographics.

FACEBOOK STATISTICS

TOP 5 SHARE HOLDERS – as of 23rd May 2012 – FB (in $) LNKD (in $)

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GS Investment Strategies LLC Goldman Sachs Group

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@Twitter-“SMS of the internet”-is an #OnlineSocialNetworking and #microblogging (up to #140 characters) service.

It was created in March 2006 by @JackDorsey (currently Executive Chairman), with co-founders – @EvanWilliams and @BizStone who are now holding positions of the Director and Creative Director respectively. It was launched on air ready-for-use on July 15, 2006.

#factbite – “twitter” is the brainchild of a load of brainstorming sessions held by the B.O.D. of @Odeo, (a podcasting website)

Twitter grew mainly as the number of tweets/second increased, as that suggested that more and more people are using twitter per second, and it was therefore gaining popularity. Certain events that helped monitor the progress were, for example, • A record was set during the 2010 FIFA World Cup when fans

wrote 2,940 tweets per second in the thirty-second period after Japan score against Cameroon on June 14, 2010.

• The record was broken again when 3,085 tweets per second were posted after the Los Angeles Lakers' victory in the 2010 NBA Finals on June 17, 2010.

• The current record was set during the 2011 FIFA Women's World Cup Final between Japan and the United States, when 7,196 tweets per second were published.

(Reference - http://en.wikipedia.org/wiki/Twitter)

It has been used to : Organize protests referred to as “twitter revolutions” (eg. The

Egyptian Revolution in 2011) Civil disobedience drills, De-facto communication system during emergencies and for

breaking news, Making TV more interactive and social.

The twitter logo – “Larry the bird”, has been adopted from “Larry Bird” of the NBA’s Boston Celtics team.

Most of its revenue is through paid advertising by purchasing ‘promoted tweets’ which would appear in selective search results, which is to say to a select clientele looking for those products. They already have signed up clients like Sony Pictures, Red Bull, Best Buy and Starbucks.

Zynga is a social networking game development company that develops browser based games which may be either stand alone or as application widgets on social networking sites like Facebook, Orkut, Google+ and MySpace – founded by a team comprising of Mark Pincus, Eric Schiermeyer, Michael Luxton, Justin Waldron, Kyle Stewart, Scott Dale, Steve Schoettler and Andrew Trader. The idea was conceived in July 2007. CityVille, CastleVille, Zynga Poker, FarmVille and Empires and Allies are its most sought after games among others. Wiki states - As of February 2012, Zynga's games on Facebook have over 240 million monthly active users.

Zynga is supported in two manners: via direct credit card payments and partner businesses. Several Zynga games require an "Energy" characteristic to play. Engaging in "Missions", a core feature of many games, consumes a certain amount of energy. After expending energy, it slowly replenishes to the character's maximum limit. This can take minutes or several hours (energy replenishes whether or not players are logged into the game). After energy is replenished, players can engage in additional missions. Waiting for energy to replenish is a significant limiting factor in the games. Their support mechanisms take advantage of this. The revenue here is basically made from advertisements and sale of virtual goods. People can pay through credit cards for these too.

TOP 5 SHARE HOLDERS – as of 23rd May 2012 – ZNGA (in $)

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Morgan StanleyGordon William BCapital Research Global InvestorsPincus Mark JJanus Capital Management LLC

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Groupon is a deal-of-the-day websites which makes available gift certificates which can be used while shopping from local and national companies. Groupon was created by Andrew Mason, its current CEO. The idea for this website stemmed out of a campaign site called “ThePoint.com” in November 2008. His former employer Eric Lefkofsky provided $ 1 million in seed money to develop the idea.

What Groupon does, is it offers „one Groupon per day‟ to each of the markets that it serves. Now, it works on a model whereby it uses ThePoint.com‟s platform working by the concept called an „assurance contract‟, where if a particular number of people sign up for an offer, it becomes available to all. And if that predetermined minimum isn‟t met, no one gets the deal that day. Groupon makes money on its deals by taking 50% of the amount that the customer pays for the product/deal. The site has recently launched a mobile application available on Wap, Android, Blackberry, iPhone and Windows Phone 7. It allows users to buy deals on their phones and retrieve them using the screen as a coupon.

TOP 5 SHARE HOLDERS – as of 23rd May 2012 – GRPN (in $)

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NEAManagement

Co. LLC

Price T RoweAssociates

INC/MD

FMR LLC TechnologyCrosses

ManagementVII, Ltd.

MorganStanley

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Silicon Valley is going bullish on the Money Network companies. A lot of really accomplished angel investors and venture capitalists from Silicon Valley are on the Boards of these companies, or connected to them in someway. But mostly, investing aggressively on these stocks. To name a few - Ron Conway, known by some as the Godfather of Silicon Valley has invested in Facebook and

Twitter. Kleiner Perkins Caufield & Byers (KPCB) is one of the major firms backing start ups and it has

invested in Twitter, Zynga and Groupon.

Reid Hoffman is one of Silicon Valley’s most prolific and successful angel investors. He holds shares of value well over a billion dollars in LinkedIn

Jim Breyer invested alongside Accel Partners in Facebook’s first major round. His investment of

$1 million is said to be worth more than $500 million. Price T Rowe Associates INC/MD is one of the top 5 share holders in LinkedIn and Groupon

and is making sums of around $750 million and $300 million respectively. Morgan Stanley again is one of the top 5 share holders of Zynga and Groupon making sums of

over about $205 million each.

Andreessen Horowitz became the first venture firm that has investments all the four in the highest valued(as of 2011) privately owned social media companies – Facebook, Groupon, Twitter and Zynga.

The investors find it a great place

to invest, but it will take a few years

before the jury is out on this

opportunity.

It's a high risk high return strategy,

hence they should size their bet

properly.