The big news that everyone is buzzing about — Facebook’s $16 billion acquisition of WhatsApp — represents the largest acquisition of a venture-backed company in history. I thought I’d share some of my initial takeaways from Wednesday night's big news.
See also: What's WhatsApp and Why Did Facebook Pay $16 Billion for It?
People are social and yearn to be connected. That was our big bet when we launched AOL more than 25 years ago. While some of our competitors focused on content (such as CompuServe) or commerce (such as Prodigy), we went all in on community, believing that the “killer app” was people. That's why we launched chat rooms, instant messaging, buddy lists and other social tools and made them the core of AOL. And that’s why these community features always generated the majority of AOL’s usage.
Over the past decade, what we called "community" has been rebranded as social, and the hot new brands have largely been people-powered. Ten years ago Facebook came onto the scene, to connect people in new and better ways, and a decade later they have 1 billion users and a valuation $170 billion, eclipsing the $150 billion value AOL reached at its peak in 2000. And WhatsApp emerged in the past several years as the hot new communications app. What unites them all — Snapchat, Instagram and many other popular new services — is the focus on connecting people.

Two visionaries started WhatsApp four years ago: Jan Koum, a Ukranian immigrant who survived off food stamps as a teenager; and Brian Acton, who Facebook turned down for a job in 2009. When they started they were surely surrounded by skeptics who believed the marketing for messaging apps was already too crowded and they had little chance of success. But they believed in their vision and assembled a passionate team, and made history.
This belief there is a better way has led to America rising from being a startup just 250 years ago to being the leader of the free world. American entrepreneurs led the way in the agricultural revolution, then the industrial revolution and now the technology revolution. WhatsApp is a great example of why America is the most entrepreneurial and innovative nation in the world.
WhatsApp has 450 million active monthly users, and they're adding 1 million new users each day. That’s led to the extraordinary valuation. We’ve certainly made great strides over the past several decades. When we launched AOL, only 3% of people were online, and they were only online an hour a week. Times have changed, fueled by the rapid globalization of the Internet. Now there are 2.5 billion people online, which makes it possible to go from zero to 450 million users in just four years. It’s remarkable, and the opportunities it creates stretch the imagination.


Viral is the new marketing, and great products increasingly sell themselves. WhatsApp built its massive audience with no traditional advertising or marketing. They just created an awesome app and made it compelling enough (and easy enough) for people to tell their friends. And it spread like wildfire.

WhatsApp is on track to connect 1 billion people worldwide, yet they are run by a small team of 50 people who created the platform virtually overnight. This should send shock waves through the boardrooms of Fortune 500 companies. The ability to disrupt industries has accelerated. The key is people, and the companies that have the best talent will win.
However, this battle for talent isn’t limited to companies — it also involves countries. Moreover, Koum’s personal history is a stark reminder of why we need to win the global battle for talent by passing immigration reform. Other countries have made it easier for innovators to relocate, while America has made it harder.
A good example is Snapdeal, a company that filed to go public this week. The founder was educated in the United States and tried to stay here, but was unable to get a visa, so he moved back to India, and started his company there. Now it’s a successful public company creating jobs and economic growth elsewhere. If we’re going to remain the most innovative entrepreneurial nation, and maintain our position as the leading economy in the world, we must pass immigration reform this year, so we are positioned to win this battle for talent.

Startups obsessively and passionately focused on one thing can beat incumbents focused on many things. That’s what makes the startup world so exciting. WhatsApp did this focused like a laser beam on the consumer experience. Facebook has wisely decided to continue to allow WhatsApp to run autonomously. That’s the best way to maintain the entrepreneurial drive and zeal and continue to grow the service.
See also: 4 Free WhatsApp Alternatives
By contrast, the M&A model in the 1980s and 1990s was to integrate. Microsoft typically required the team of companies they acquired to relocate to Seattle. When I was running AOL, we didn’t go that far, but we did make the mistake of trying to manage these new brands too centrally. Indeed, the WhatsApp of the 1990s was ICQ, which we acquired in 1999.
The personal computer had a great run, and it drove the first wave of Internet adoption and use. PCs will continue to be important, but less so. Fifteen years ago, the PC was everywhere. Ten years ago, it was the core, but supplemented, by mobile. I was all about mobile-first startups 5 years ago. Now it’s mobile only for a growing number of companies.
While Facebook surely saw value in owning WhatsApp and managing a broader portfolio of digital businesses, I suspect this was more of a defensive move. They decided to trade 10% of their market cap to ensure they own — not Google or somebody else — this hot new platform, and also to hedge against the risk that WhatsApp might eventually displacing Facebook itself as the king of the social world. While the valuation shocked the world, that strategic calculation was wise.

WhatsApp is the largest acquisition of a venture-backed company in history. Over the past three years, Sequoia Capital invested an estimated $60 million in the company — and now their stake is reportedly worth more than $3 billion. After a decade of mediocre returns, the venture asset class is showing momentum.
See also: 10 Other Things Facebook Could Have Bought for $16 Billion
And crowdfunding — the seed corn for startups — will make it easier for entrepreneurs to start companies, by enabling them to use the Internet to attract individual investors. The startups that get traction will then seek “smart money” from venture firms with track records of helping entrepreneurs build great companies. This bodes well for the venture firms, but also for the entrepreneurial community and, more broadly, for the country. Our best hope for a stable fiscal situation is strong economic growth, and that will only come from innovation.

The sticker shock emanating from the price paid by Facebook has people talking about valuations and the constant refrain of “Is this a bubble again?”
Having watched AOL go from $70 million at 1992 IPO to $150 billion in less than a decade, it does feel a little like déjà vu. But the reality is that companies can (and do) scale faster, and generate revenue — and profits — with much greater velocity and scale than was ever previously possible. So yes, some companies may be overvalued, but many others aren’t. It’s a mistake to paint the landscape with a broad brush.
Steve Case is the co-founder and former CEO and chairman of America Online (AOL).