Beyond the usual hoopla over the Facebook acquisition of Oculus VR hides a truly spectacular feat of individual Making (capital M) and a huge milestone in the history of (crowd)funding and selling a business. In my mind, it even eclipses the acquisition of WhatsApp just a month ago, as well as the acquisition of Instagram (all by the same acquirer, more on that in a bit).
Palmer Luckey, the founder and inventor of the Rift, began working on the product sometime around 2009 as a student at USC. He posted about his little project on August 21st, 2009:
I am making great progress on my HMD kit! All of the hardest stuff (Optics, display panels, and interface hardware) is done, right now I am working on how it actually fits together, and figuring out the best way to make a head mount. It is going to be be out of laser cut sheets of plastic that slide together and fasten with nuts and bolts. The display module is going to be detachable from the optics module, so you will be able to modify, replace, or upgrade your lenses in the future!
This is 3.5 years before selling the company for 2 billion dollars: one guy, hacking together a product. Inspiring.
After creating a prototype, Oculus Rift was launched as a Kickstarter campaign in August 2012, with a modest goal of $100,000:
We’re here raising money on Kickstarter to build development kits of the Rift, so we can get them into the hands of developers faster. Kickstarter has proven to be an amazing platform for accelerating big and small ideas alike. We hope you share our excitement about virtual reality, the Rift, and the future of gaming.
It became one of the most successful projects on Kickstarter, raising $2.4 million.
Let’s repeat that for a second: 18 months before being sold for $2 billion, the product received its first funding of $2.4 million on a crowdsourcing platform.
And a final thought goes to the company that acquired all three companies (Oculus VR, WhatsApp and Instagram) mentioned. Mark Zuckerberg and his team deserve more credit than they’re getting. It seems that the common analysis is that crazy money is being thrown all around by companies who fear competition and fear missing out on the next big thing.
But there’s more business savvy going on: most of the value exchanging hands in the acquisitions of WhatsApp and Oculus VR (16B and 1.6B respectively) is in Facebook stock. Facebook is using the fact it’s a publicly traded company and its currently very highly priced stock in just the right way: to generate new business way into the future.
Traditionally, a company would sell stock to the public to get cash required for its operation. Facebook is using stock, a piece of paper that only has its current value based on the expectation of future profits, to acquire the very future profits in question. No cash needed.
Assuming no major economical disasters, Facebook stock is expected to remain strong. This means more “insanely” priced acquisitions of nascent and/or massively growing businesses in the near future. Exciting times.