Startup Executives Discuss the 'Facebook Effect'




By Julia Boorstin, CNBC Correspondent

NEW YORK ( CNBC) --The Montgomery Tech Conference in Santa Monica, Calif., gathered 190 startups to present to hundreds of venture capital and private equity investors, along with media and technology companies looking for strategic investments.

Everyone talked about the same thing: Facebook's massive IPO Facebook effect.

Call it "the Facebook effect" -- the startups here tell me Facebook's IPO is changing the conversation with their investors and customers, and that's a good thing. It may not be impacting their individual financing plans, but such a massive IPO, so long in coming, has a halo effect on the entire digital industry.

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Vantage Media, which is profitable with over $100 million in revenue last year, tells me that Facebook's liquidity event legitimizes digital startups. CEO Patrick Quigley says it'll be easier to raise capital both on the public and private markets.

While Vantage could think about an IPO in the not-too-distant future, on the other end of the spectrum is Flite, which is not yet profitable, with about $10 million in annual revenue. Its CEO tells me that Facebook's IPO will drive more attention to digital businesses like his, which update online ad campaigns in real time. Facebook's recognition as an $80billion plus business means that Fortune 500 companies better start thinking about making their brands and products up-to-date on its growing platform. A number of Facebook-related startups here tell me they expect the spotlight on Facebook to drive big companies to invest in social marketing and analytics -- tools which they provide.

Montgomery & Co Chairman James Montgomery tells me he sees Facebook's IPO helping open the market, predicting that the number of VC-backed US IPOs will grow by more than 50% this year to around 75. Another impact of Facebook's IPO? Newly-flush employees will leave to invest in new startups.

But VC Tim Draper warns that Facebook's IPO won't make startups any more eager to go public. The cost, the liability, the hassle of an IPO -- it all prevents CEOs from running their businesses the way they want to. Draper has an ulterior motive slamming the public markets -- he was flogging an investment in a company that creates alternatives to IPOs, secondary market Xpertfinancial.com.

-- Written by Julia Boorstin for CNBC.
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