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Summary:

Quora, a Q&A service has raised a whopping $50 million in funding from co-founder Adam D’Angelo along with Facebook funder Peter Thiel, Northbridge Ventures and Matrix Ventures. One of the most over-hyped startups, the question is why is it valued so highly despite mediocre progress.

Quora co-founders Charlie Cheever & Adam D'Angelo @ Crunchies 2010

Quora co-founders Charlie Cheever & Adam D’Angelo @ Crunchies 2010

Quora, a Palo Alto-based knowledge (read: Q&A) community has raised a whopping $50 million in Series B funding from co-founder Adam D’Angelo along with Facebook early funder Peter Thiel, Northbridge Ventures and Matrix Ventures. D’Angelo, who was chief technology officer of Facebook, has put $20 million of his own money (big props for that) in Quora while others chipped in the rest.  D’Angelo co-founded the company with Charlie Cheever in 2009 and currently has about 30 employees.

The company’s valuation is said to be $400 million, which only adds to the hype around the company. About a year ago, I had heard the company was getting investment interest at valuations in excess of $300 million. The company has thus far raised $61 million in total. Surprisingly, in the most recent announcement, there was no mention of previous investor Matt Cohler of Benchmark Capital, another early Facebook employee. (Matt Cohler emailed and let me know that Benchmark did indeed participate in the round.)

And what is the company going to do with this much cash? Well, grow its team, build out its infrastructure and do stuff most normal companies do. On Quora, D’Angelo writes:

We intend to use some of this funding as a cushion in case of macroeconomic changes. More than half our series A funds from two years ago are actually still in our bank account today. We could have waited longer to raise this round, but we wanted to extend our runway. That lets us keep our focus on long-term growth and quality, and lets us avoid making short term tradeoffs like many other companies.

And then there is some laughable explanation that they will have huge Amazon Web Services bills so they need the money.

We project a large portion of this money to go to EC2 and other AWS bills. It might be replaced by whatever the most appropriate place for us to run our infrastructure is in the future but as of today it’s looking like EC2.

Appdata puts its usage through Facebook Connect at about 180,000 monthly-active users and about 20,000 daily active users. I am sure they get a lot of traffic from the Web, but it can’t be enough to justify the nosebleed valuation.

The question here is why does this service merit such a high valuation? I mean, its traffic at best can be described as middling. There is lot more fly-by traffic from search engines, but is that enough to justify their valuation? Its mobile applications is meh and more of an afterthought. The design of the service is forgettable. Some members of the team have left to work for other companies such as Pinterest and Facebook. The only thing that is actually good about the service is some of the content contributions and the discovery of content.

Now in comparison, Instagram was a startup that snagged $50 million on $500 million (rumored) valuation before being acquired by Facebook. It had great mobile expertise. It had more than 30 million members and it had a very engaged daily audience. It was content that appealed to many people and it was growing so quickly that Facebook had to buy it.

When you compare Quora’s lack of traction with another Q&A community, Stack Exchange, which liberally shares its usage data, you are left scratching your head, asking yourself, what am I missing? Of course, there is the timing. Facebook is going public soon and that essentially raises the value of anything related to Facebook, merited or not. The way I see it, it is a deal that is being done because it can be done. Or as The Wall Street Journal says, it is Facebook mafia at work.

Updated on May 16, at 8.22 am with  a statement from Matt Cohler, who intimated that Benchmark Capital did indeed participate in this round of funding.

  1. If Quora fails, it will burst a massive hole in the Silicon Valley fantasy world that the anointed priesthood of Facebook and PayPal can do no wrong.

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    1. Quora is a huge black hole for one’s productive time. It’s very easy to pop in and then realize to your horror that you have just wasted 2 hours of your life on absolute trivia. That’s what Quora is about basically. Trivia. I have seen a member since last summer and can’t report on anything important that I have learned there.

      The site also suffers from political infighting which leads to good but contrarian answers being downvoted into oblivion while the claptrap gets voted to the top.

      It’s little more than a place for Silicon Valley wannabes to waste time while pretending that they belong to something cool.

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      1. That’s true. Quora has a class, well above other shallow start ups.

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  2. You are right, Quora is not the massively disruptive company that many folks think it is. It is another Q&A site. However, in the right situation, it could be hugely valuable. My guess is that LinkedIn and Quora would make a great match. LinkedIn has zero engagement but a massive audience, and Quora has little ability to generate its own traffic but has great company content (something that LinkedIn is bulking up on). Best outcome would be for LinkedIn to purchase Quora before the valuations get further out of control.

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    1. As an early adopter of the site, for a while I thought this would be a good way to publish and learn. That is still the primary purpose of the site and it does have great content, especially if you are willing to spend time looking for it. However, is it a major Internet destination or a company with a stratospheric valuation, well, probably not. If the co-founders want to run it as a hobby project, perhaps not such a bad thing.

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  3. It was ‘silly season’ when Color got 41m. Quora getting 50m isn’t surprising, or unwarranted; Quora isn’t going anywhere, if anything it’s just hitting the mainstream web. Time will tell though.

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  4. Flux Research Tuesday, May 15, 2012

    I would love to see some real stats on Quora. They must be fantastic because there’s no way this could be a sign of an emerging investment bubble!

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    1. That is one answer you are not going to find on Quora.

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  5. Oz Har Adir Tuesday, May 15, 2012

    Om, I think you’re very right, and one can add the Google Trends for websites graph to compare the traffic of Stackoverflow and Quora:
    http://trends.google.com/websites?q=stackoverflow.com%2C+quora.com&geo=all&date=all&sort=0

    Outside of the US, the ration between Quora/Stackoverflow is about 1/10 (in the US its closer to 1/3, and neither of the service has been growing there lately)

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    1. Thanks for the link Oz. Pretty illuminating.

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