OpenTable's acquisition of Foodspotting shows why entrepreneurs should pay close attention to their platform capital.
Online restaurant reservation service OpenTable announced yesterday that it has acquired start-up Foodspotting for $10 million.
OpenTable lets diners book a table at their favorite restaurant. Foodspotting helps you choose a restaurant in the first place. You can search the site by restaurant or type of meal. It then serves up a set of user-uploaded photos of dishes at certain restaurants. The New York Times reported yesterday that Foodspotting has a database of three million food photos and is adding a few hundred thousand pictures every month.
But was that really enough to get Foodspotting a check from OpenTable? There are more than photos at work here.
The value of your platform capital
You can bet Foodspotting’s platform capital also played a role. Your company's platform capital is the aggregate number of your Facebook fans, Twitter followers, email newsletter subscribers, etc. This is an asset acquirers will include in their calculation of what your company is worth to them. Foodspotting has more than 40,000 Facebook “likes” and more than 218,000 Twitter “followers.”
In a recent survey of the users of SellabilityScore.com, businesses with a platform of at least 10,000 followers get offers to acquire their company at a rate almost twice that of companies with a smaller platform.
When asked if they had received a written offer to buy their business in the past year, 23% of entrepreneurs whose companies had at least 10,000 followers (Facebook, Twitter, etc.) said yes. That compares with only 13% of entrepreneurs whose companies had less than 10,000 followers.
Think of your platform capital as money in the bank
Just like you keep tabs on your bank account, you should track your platform capital carefully. Focus on building it prudently over time. Understand what makes it grow. Analyze what causes it to erode.
You spend platform capital when you spam your list or tweet something blatantly self-promotional. You never spend money without measuring your expected return on investment. Similarly, you should only spend platform capital on significant opportunities.
But spend wisely. As Foodspotting’s founders will tell you, your platform capital can help boost your return on investment nicely when it comes time to sell your business.