BUSINESS BLOGS
BUSINESS BLOGS
category: business
14 Apr 2009

The Tribune company’s Chicago Tribune is laying off 20% of its newsroom.  That’s got to hurt.

The Boston Globe is asking itself: What went wrong?  The Globe belongs to the New York Times company, which publishes the eponymous paper.

Not to be outdone, the NYT itself was the victim of a great piece / hit job by Vanity Fair, which by the way, very well could be the best magazine out there (despite the fact that the rag now publishes, oh I’d say 2 articles per issue, apparently), if anyone still read magazines, that is.

Anyway, for what it’s worth, I think it’s absurd to blame newspapers for not “doing more sooner”.  The more they would have done, the sooner they would have shrunk their businesses and gone out of business.  Seriously, would the train companies really fared better had they dived into the airline business?  Probably not.  Would record labels really be bigger companies generating more revenues if they dove into digital music?  Nope.

The truth is: before the Web came around, companies profited because they took advantage of an inefficiency.

Newspapers prospered and profited because they exploited the inefficiency of capturing data, aggregating it all, then publishing it to the masses.  At its core, the web flattens the world and removed that inefficiency.  It creates others and others are exploiting those inefficiencies.  Google is doing it one way, Amazon in another, Apple yet another… and in our own little way, WatchMojo.com in yet another.  That is how innovation and entrepreneurship works.

Here’s a fact: you don’t need that many people to do a job that you used to need to do the same job, thanks to the Web.   

The newspapers are bloated, and I cannot think of any other 150 year old industry that wouldn’t be.  Unless they are willing to accept massively leaner company structures, smaller top lines and probably lower bottom lines, I don’t think they will survive.  It is a shame, it is a loss, but isn’t this what capitalism is all about? Aren’t these the “freedoms we fight for?”

category: business
13 Apr 2009

Accel’s Jim Breyer is joining eBay’s board. I am not a major fan of VCs, admittedly, most are having a hard time running their own business, let alone giving sound advice to the businesses they invest in. 

But some VCs have managed to build their brand quite well, deservedly so, oftentimes through shrewd investments, sound decisions and a healthy dose of networking.

Breyer is probably best known for being on the board of Facebook and one of Mark Zuckerberg’s biggest backers.  But while everyone can question Mark Z.’s wisdom for not selling Facebook yet or his management team’s game of musical chairs, as an entrepreneur myself, I must say, it’s great to see Jim Breyer back Mark Z. 100% (I don’t doubt if privately they have heated exchanges, but at least in public, the man stands alongside and behind Mark, and doesn’t seem to try to get in the way).

Anyway, what’s interesting about Breyer is that he’s not just a sought after board member of startups, but also established powerhouses such as Marvel and Walmart.  Well, you can add eBay to the lot, too.  For eBay, this is critical since they just announced spinning off Stumble Upon and word on the street is that Skype is next. 

If a company shells out billions on startups ($4B for Skype, $75M for Stumble Upon) and doesn’t know what to do with them, they lack startup mojo, and perhaps having someone like Breyer on board will allow them to not just spot amazing opportunities but integrate and scale them further.  Read Mark Arrington’s man crush here.

And speaking of Marvel, check out some of these videos on DC Comics and Marvel action heroes below:

category: business
13 Apr 2009

Let me ask you something: why is it that raising venture capital means that suddenly companies that do raise money can allow themselves to show bad judgment?

Time Value of Money Suddenly Means Denial

Traditionally, a company raised financing from VCs, which bought them time to focus on long term payoffs.  But over time, this meant that founders and executives could remain “pre-revenue” for as long as they desired.  In turn, this basically camouflaged bad business models, woeful products and inept managers.

What Would Fred Say?

Don’t take it from an entrepreneur who’s never raised VC like me, however, take if from one of the best VCs in the game: Union Square Ventures’ Fred Wilson, who in this video from the Insite NY series (via Business Insider) talks about how money doesn’t solve problems.  I’ve embedded the video at the end of the post.

I tend to agree with Fred on this point.  We’ve never raised any VC.  Initially, this had to do (I think) because we faced litigation from a major media company (since settled).  Then, I think, VCs got all hot and heavy over social media and UGC (how’s that faring, gents?).  Eventually, I realized it actually had to do with my bad approach to fundraising altogether, which I’ve outlined here: Why salespeople make bad fundraisers.I think by focusing on sales, however, it forces management to take a candid approach to what works and what doesn’t.

Reporting From The Front Lines

For example, I was on a call with a potential “partner client”.  By partner client, I mean a company that pays WatchMojo.com either via

a) flat-fee licensing revenue or
b) ad-share syndication revenue

In both cases, we get branding and distribution.  It’s quite genius, if I daresay so, as we end up getting paid to promote our brand and add to distribution (we’re past 50,000,000 and counting), but this is because the demand and supply of content vs. distribution is in our favor, even though the so-called “smartest guys in the room” have yet to figure this out and are pouring more and more money into distribution (how are the results faring, gents?)

On this most recent call with my counterpart, she was arguing how they were doing us a favor and we should be happy about the incremental distribution.  I didn’t give in an inch, arguing that “it’s unfair to our other clients who do pay us”, which I think is a pretty fair argument to make.

Ultimately, she paused and asked: “are you VC-backed?”

“No, we fund our operations via actual client sales” was my response.

“Oh, you’re bootstrapped?  Ok, we’ll pay the minimum and work with you to build up the revenue we generate for you”.

It was odd.  Maybe she pitied us, who knows.  But the point is, when she assumed we were VC-funded, she took it for granted that we needed to show actual sales, even though VC-funded companies are expected to increase sales in a hockey stick pattern.  It was as if VC-funded companies were reckless, foolish, or worst: both.

What Does This All Mean

While VCs get a bad reputation, they are supposed to be an entrepreneur’s best friend.  Entrepreneurs need VCs to keep investing, and right now, that is not happening.  Just as VCs start to see a light at the end of the tunnel, the numbers come out and suggest that the light is in fact an incoming train.

One of the few IPOs, Current TV, is canning their public altogether.  Tech Crunch summarizes the data, and it doesn’t look good:

Number of U.S. Venture Funds Raising New Capital

1Q09: 40
4Q08: 47
3Q08: 62
2Q08: 78
1Q08: 71
4Q07: 85
3Q07: 77
2Q07: 85
1Q07: 81

Dollar Amount of New Funds Raised By U.S. Venture Capital Firms (in billions)

1Q09: $4.3B
4Q08: $3.5B
3Q08: $8.4B
2Q08: $9.3B
1Q08: $7.2B
1Q09: $4.3B
4Q07: $11.9B
3Q07: $8.6B
2Q07: $8.7B
1Q07: $6.5B

That doesn’t look like a hockey stick pattern if you ask me.

In fact, you start to see that the strongest funds will only grow stronger while the weak will die out.

“There’s pressure on the newer funds,” says David Pakman, a partner with Venrock, an established New York-based venture fund originally started by the Rockefeller family. “It’s not a great time to be investing if you are a new fund. It’s not because they are bad. It’s because their track record is not as long. ”

As a sign of the times, Intel Capital is now only going to focus on the bigger deals, those, in fact, that need VC less.

What is the silver lining?  Well, hate to be negative, but I am not sure there is one.

- If you are a VC and have burned millions - if not billions - and your investors (pension funds, endowments) start to ask some tough questions, you might start to have to answer to the feds, and no one wants that.

- If you are an entrepreneur, start a company where you know clearly who your clients are, or hit up angels that know you and will fund you.  Otherwise, you’re screwed.

Here’s the video with Fred Wilson of USV: