Quora, a company started by ex-Facebookers, has raised a large amount of capital at a mind-boggling valuation from Benchmark Capital’s Matt Cohler, an ex-Facebooker himself. Why is the company getting this super valuation? And is it really worth all that money? My take.

Last week, I reported that Quora, a Palo Alto, Calif.-based company started by former Facebook employees such as Adam D’Angelo and Charlie Cheever, was looking to raise money that would eventually give it a valuation of around $100 million. Today there are reports that the company raised about $11 million at a valuation of $86 million.

Quora, a massive user-created question-and-answer site that may one day compete with Yahoo Answers and Wikipedia, itself confirmed the funding in an ambiguous-sounding press release but never got around to giving details. The new funding has come from Benchmark Capital with former Facebook employee Matt Cohler joining the board. So why is the company getting this super valuation?

The Magic Wands

As I explained last week in my post, Hot Deals, Big Money: What’s Up With Silicon Valley?, Silicon Valley is in the meh phase and there are only a handful of companies which qualify as exciting. That’s one of the reasons why VCs are willing to bet big dollars on them.

Secondly, there is a premium these days on startups created by former Facebook stars. Much as early Googlers were viewed as wizards with special magic wands, a similar belief is sweeping across Sandhill Road. Benchmark Capital seems to have cornered the market on ex-Facebook guys — first Asana and now Quora — even if it has to indulge in high valuations.

Now don’t get me wrong — Quora is full of smart engineers and great product guys. If there’s anyone who can leverage Facebook Connect and Facebook’s social graph to build a company, it’s Charlie Cheever, formerly the leader of the Facebook Platform and the Facebook Connect platform.

Is Quora Really Worth the Money?

The big question is, of course: Is Quora worth this excessive valuation? And the answer is simple: no.

I think there is more noise around this startup because many venture capitalists, entrepreneurs and other Silicon Valley insiders are talking amongst each other on topics that concern them. Considering that the service is still in closed beta, it makes sense that right now there is a lot of “fidelity” in the conversations about Quora.

The company talks in abstract terms about its plans for the future, including opening up the gates to everyone. It is not clear how these high-quality conversations are going to avoid sinking into a cacophony as Quora starts to chase growth and attract more customers. But it has to do to that — after all, with VC funding comes the VCs’ desire for a return on their investments.

The big challenge facing Quora is the one that was faced by another, similar company: Aardvark. That startup had similar buzz, a pretty well known (and respected) founding team and market attention, yet could barely grow to some 90,000 users before Google decided to buy it for a reported $53 million.

Matt Cohler, who invested in Quora, argues that the concept of fidelity is very relative and means different things to different people, especially to people outside of Silicon Valley.

“One of the big changes I have seen happen on the social web is that different users of these social web services all take whatever they want from the service and use it in a very personal way,” he said. “The Quora teams understands that and that is why they are special.” Cohler said that there are pockets of non-Silicon Valley activity on the service and it was important for him to see that before investing in Quora.

Sure, much like Liz, I love using Quora, but the question I always ask myself is: Would I miss this service if tomorrow it disappeared from the face of the earth? Maybe for a few seconds. After all, we’re on the Internet, and soon something new will come along to make us forget the past and move on.

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By Om Malik

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  1. My Locator ® Monday, March 29, 2010

    shows signs of desperation on the part of vc? spare me the talent buy magic wand garble. im getting flashbacks of cuil. benchmark should change their name to Clueless VC.

    1. Hey I am not sure if I would call Benchmark a clueless VC: their track record speaks for itself.

      On Cuil, I would say yes to that sentiment. I think it is pretty clear that it isn’t going to be as easy to turn this into a real big business and that is why i remain a tad on the skeptical side.

  2. Marshall Kirkpatrick Monday, March 29, 2010

    The ratio of interesting to uninteresting questions served up by Aardvark has, for me, changed dramatically since the acquisition. Fwiw.

    1. I think it is the problem with many of these services: the minute you remove the “proverbial dolby button” the noise level goes up drastically.

      As an aside: It is funny how none of these kind of services ever tried to love inside Facebook.

  3. Does anybody in SV do really ground braking work. I mean like, I hate Files and Folders and want the system to organize itself, including URL’s. OR what is the information value of an article, or to know when to stop providing yet another article with the same “news”(something Google doesn’t know).

    Feels like Microsoft(90’s) all over again, if one wanted funding one had to run in the Microsoft environment, not against them. And along came the Web, invented at CERN and monetized in SV. Question is will that happen again(invented outside SV and monetized there)?

  4. So Quora is:

    1. Founded by ex Facebook people.
    2. Similar to Aardvark
    3. Going to leverage Facebook connect to build a business.
    4. Not worth its valuation.

    All good to know. However since I have never heard of them before, what would have been really great to include is a sentence or two describing their business. What does this site actually do?

    1. Chris,

      There are three links outlining everything they do, but your point well taken. I am adding an update.

    2. +1. Forgot to read the primer on Quora before reading this piece.

  5. Of course it is not worth $80M+ but they got the valuation so it’s a moot point. Let’s also keep in mind that these folks are Facebook cast-offs, meaning they did not have what it takes to succeed within Facebook. This makes the investment doubly interesting to me.

    1. That is not true — they were early FB builders and exited after spending more than four years at the company, taking with them their share of the company. I think it is smart for them to use their current cachet and raise money and go into business fo themselves.
      Success, however isn’t going to be that easy.

  6. I agree with you,Om. I am not astrologer. But I am sure another tsunami is knocking at doors of 2nd generation web companies. New companies are cropping up like mushrooms without solid revenue plans. And thoughtless VCs are blindly shedding their money because they think every startup is a Google.

    What do you think? Am I wrong ?Today 95% of the startups are in social web arena and more are still coming out only to confuse and bore netizens.

  7. Taking that kind of money at that kind of valuation for a concept that is clearly inexpensive to prove out is very dangerous.

  8. I love this line ‘Benchmark Capital seems to have cornered the market on ex-Facebook guys’ – I didn’t even realise there was a market on ex-Facebook guys, glad I’m not in it.

    How about a piece on outcomes for tech/software/internet startups that hit say valuations of $25m or more at this early stage (e.g. pre 10m uniques per month; pre revenue; pre five employees; pre 1 yr of life) and how their outcomes track?

  9. Isn’t FormSpring basically the same? There’s nothing really new or exciting about this venture.

  10. I believe Quora will prosper due to the smart people like Charlie Cheever running it who started Facebook Connect and Facebook platform. Most people do not see the overall picture in the beginning until the idea goes mainstream. As an experienced web designer and SEO Specialist I have seen simple ideas turn into global trends worth billions of dollars.
    Quora, we wish you the best.
    – Daniel Chege

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