The Most Valuable Real Estate in the World

May 9, 2013
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Related Companies:

Box

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DocuSign, Inc.

DocuSign makes it easy and fast to get documents signed with the world's largest electronic signature platform.

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LinkedIn

LinkedIn operates the world's largest professional network.  BVP funded LinkedIn in 2006 and supported the company as it grew.  The company went public  in May 2011 (NYSE:LNKD).

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Pinterest

Pinterest is a visual bookmarking tool that helps you discover and save creative ideas. Their mission is  is to help people discover the things they love, and inspire them to go do those things in their daily lives.  In early 2011, BVP led the Pinterest Series A and we've continued to support them at every stage.

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Yelp

Yelp was founded in San Francisco in July 2004 to connect people to great local businesses. In 2005, we became Yelp's first institutional investor. Yelp went public in March 2012. (NYSE: YELP)

 

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The average price per square foot of prime real estate is running about $11,000 in Hong Kong, $7,600 in Tokyo, and $5,300 in London according to Forbes. All of those are bargains, however, compared with real estate that is potentially worth six orders of magnitude more than those amounts. The most valuable real estate in the world is actually in the palm of your hand. Literally. This space often commands valuations of $1b per 1/4 square inch or more, and there is scarcity because only about 24 of them available. They are the mobile application launch buttons on your iOS or Android home screen.

The correlation between a business being able to “own” a scarce spot on your home screen, and become a highly valued business, is extremely high. Just look at your own home screen right now. It’s probable that many of these power applications are sitting on your home screen right now, and all of them are already valued* at over $1b: Facebook (~$40b), Twitter (~$10b), LinkedIn (~$20b), Pinterest (~$2.5b), Yelp (~$2b), Evernote (~$2b), Box (~$1.2b), AirBnB ($1b+), Salesforce.com (~$25b), and Zynga (~$2.6b) are likely examples. Of course metrics like total downloads and usage matter as well, but home screen placement is a rough proxy for those metrics and customer loyalty.

Instagram hadn’t earned a penny of revenue from their 13 employees when Facebook stepped in and bought them for ~$1b last year, but they did have home screen placement. Waze is a relatively new application that also has little revenue, but generates M&A interest over $500m+, largely because they were starting to displace Apple’s own "maps" application from the home screen.

Where is this market headed? At Bessemer Ventures Partners, we believe we’re still in the early days of the escalation of high quality mobile applications. The good news for consumers is that the quality bar keeps going up. Hundreds of new applications are being released every day, and they are all competing for this prime real estate. You also likely have some combination of Apple default applications on your home screen including a phonebook, browser, calendar, email, camera, and photos. Will new products in these areas actually displace Apple's own apps? Will new products emerge around the quantified self? Perhaps an elegant photo sharing and storage application that finally works smoothly? Will new enterprise applications that embrace the “Bring Your Own Device” (BYOD) trend start to take off? Investor interest continues to build around consumer applications like Uber and productivity applications including Box and DocuSign for the professional user.

What does this mean for entrepreneurs? It’s a land grab! Claim your real estate. Do whatever you can to become so valuable that you warrant home screen placement, and your valuation will likely quickly follow.

 

Valuations are all rough estimates based on public closing prices on 5/8/2013 and popular press speculation for private companies.

This article was orginally published by Byron on LinkedIn