One of my hobbies is pointing out that VCs hurt entrepreneurs as much as they help them, but I disagree with 37 Signals CEO Jason F’s notion that VCs forced Aaron Patzer to sell Mint.com for $170M to Quicken.
After all, who in their right mind would reject an offer like that after three years of startup life? Apparently, I’m not alone.
I was in attendance when Mint.com launched at Tech Crunch two years ago (2 years ago people!) and thought it was neat but not the top startup, nice to see how much I knew… by the way.
But all in all, I am pretty sure their VCs didn’t want to sell, they had invested $31M in capital as recently as a few months ago at a valuation of $140M… I think Mint.com sold because their twenty-something CEO just thought it would be best to cash out. However, I think that VCs need to “clear the decks” and having invested at some lofty valuations before the market correction, any liquidity transaction is welcome, but suggesting Aaron was forced seems crazy.
Ultimately, Mint.com seems like a cool product to sign up for but I did read about some users that lost interest; but either way, their spike in net users did enough to pique Quicken’s interest and honestly, Aaron and his backers deserve a lot of props.
Amazing story, as well, by Tech Crunch on how Mint.com bought the URL for $2M in equity (I always wondered how much they paid for that URL). Last but not lease, check out Aaron’s version of the facts here.
Again, hats off to everyone involved. Hopefully Quicken won’t mess up this M&A as many acquisitions do.
On Business News Network to talk about all of the M&A of late:
- the rumored Brightcove sale to Google, which didn’t happen.
- Google buying reCaptcha
- Adobe buying Omniture.
Watch the clip here.
This has to be one of the best lines I’ve read in a while, from SAI’s Nicholas Carlson’s piece on succession planning at News Corp.
Know what happens when a boxing referee slips between the ropes and out of the ring in the middle of the match?
A hint: The brawlers don’t suddenly stop throwing punches.
News Corp. is indeed a sprawling empire, check out the numerous aspirants to the title:
# Fox News boss Roger Ailes “would kill anybody” says our source. “He’s the Dick Cheney of News Corp.” In the past, he’s said if he were younger he would want to take on Hollywood. But he’s happy printing money where he is.
# Co-chairman-CEO of Fox Filmed Entertainment Jim Gianopulos is a “street fighter, ruthless.” He’s “Rupert’s kind of guy. He runs through walls.” He’s probably News Corp’s top business guy in films. He doesn’t care about TV.
# President, Entertainment for the Fox Broadcasting Company Peter Liguori will probably be the odd man out.
# Dana Waldman, co-president 20th Century Fox Television, is “shrewd and tough in creative.”
# Chair of Fox Sports David Hill is a long-time Rupert soldier. But the old Aussie probably won’t end up doing anything new.
# Rupert’s son James Murdoch reminds people of his dad, says our source. He asks good questions, has no ego (well, there’s one difference), and is a great listener. “He has no pretensions.” Because of the obvious nepotism, people questioned his merit when he took over Sky in Europe, but the internal consensus is that he did a good job there. “He did Sky and now he’s learning the rest of the world. You have to respect that.”
# Rupert’s other son, Lachlan, is not considered a player, however. A “doofus.” He’s a “great guy to go drinking with,” but when he went up against Roger Ailes in a few political battles early in his career, “Roger tried to kill him. It was like Trevor Berbick versus Mike Tyson.”
# Watch Rupert Murdoch’s wife Wendi when Rupe goes off to that big newsroom in the sky, but not yet, says our insider. She’s still enjoying going to parties and traveling all over the world for now. But “make no mistake, she’s ambitious.”
# MySpace CEO Chris Dewolfe’s not to be underestimated, but “the bloom is off the rose.” Rupert doesn’t like two things: Getting beat and seeing execs in the press. Facebook is beating MySpace and profiles and interviews are everywhere all the time. He went to Davos this year. A bigger role in operations is not in the cards.
Now call me crazy, but while Rupert Murdoch is almost 78 (he was born March 11 1931) and his father passed away at 67, his mother is nearly 90, so methinks Mr. Murdoch will actually outlast all of these men and women, and then some.
Disclaimer: News Corp. bought IGN, which bought my old company where I was a partner and minority shareholder. I could have stuck around at FIM and had a decent corporate career, but I left to start WatchMojo.com. Noteworthy in all of this is that News Corp. sued us in 2006, claiming I violated my non-compete… but I fought back, represented myself in court and won the trial… We now have a distribution deal with MySpace TV.
But… reading Carlson’s post, it reminds me why I got the hell out of corporate life: the politics, the backwardness of fiefdoms and turf battles. Check out this WatchMojo.com video which outlines the company’s past and how the various units came to be:
There’s a rumor out there that MSFT is looking at shedding some headcount, too. From Fudzilla (via ArsTechnica and via SAI):
Currently Microsoft employs about 90,000 people across the world and from what we’re hearing, some 15,000 of those are expected to be giving marching orders come January 15th. That’s almost 17 percent of Microsoft’s total work force, not exactly a small number.
I would agree with MSFT using this downturn as an opportunity to lay off, say, 1,500 people, for example, but 15,000?
MSFT is already burdened with the image of a mature stock, whose shareholders have endured a “lost decade”.
So while I am all for increased efficiency, layoffs of this magnitude would make MSFT fall in the “stock in decline” category, which will basically ensure a second decade of doom.
In today’s climate, flat is the new growth. I doubt if even 2000’s darlings Google or Apple are growth stocks.
So far, we haven’t managed to confirm what departments or regions will be hit the worst, but we’re hearing that MSN might be carrying the brunt of the layoffs. We’re also hearing rumors about the possibility of somewhat larger staff cuts at Microsoft EMEA (Europe, Middle East and Africa).
But by cutting in growth areas, MSFT is either throwing in the towel or contenting itself to move from the monopoly category to the utility category.
The layoffs that hit startups in the past few weeks are extending to traditional media companies. Rumor has it that MTV and SONY are set to announce layoffs tomorrow, hoping that the news will get lost in the shuffle of tomorrow’s US election.
Now is the best time for companies to sharpen their focus online; that is after where consumers are headed. Moreover, as the economy shrinks, the flight to quality will only accelerate from offline to online media. This is something we called for early on this year, it’s only gaining steam now. But due to the media malaise, that won’t happen.
When you consider that NBC is set to cut spending by $500M, you sort of realize that for digital executives, the grass is greener on the other side, no matter how uncertain the other side might appear.
“I believe in my heart that this is a best time to start, run, or invest in digital companies and I am very excited about moving on to my next challenge,” wrote Chief Digital Office George Kliavkoff in a memo to colleagues when he announced his resignation from NBC.
He’s right. While Ross Levinsohn and Jon Miller left FOX Interactive and Time Warner’s AOL to run a venture capital fund, the jury is out on Kliavkoff’s plan. Like Levinsohn who helped build FOX Sports into a powerhouse, Kliavkoff previously helped morph MLB.com into one of the leading offerings of any sports media organization…
Revver is having problems, this after former eUniverse/Intermix founder Brad Greenspan bought the company for less than $5M… the company had raised $12.7M from VCs.
Disclosure 1: Revver is part of WatchMojo.com’s syndication network. From Day 1, it accounts for 0.32% of our total web streams. In case you are wondering, YouTube accounts for 45% of our total streams since Day 1. Our WatchMojo.com site accounts for 3% - which shows just how different web video publishing is to text content publishing online. But is that ever a separate post for another day.
Disclosure 2: Right before Greenspan bought the firm, I looked at acquiring Revver along with a well-known investor. I passed, when advisors told me that continuing to create original content (via WatchMojo.com) was smarter than branching off into distribution (and a relatively smaller one) via Revver.
Whether Revver survives or not, you know that there is an impending shakedown in the video aggregator space around the corner.
Side note, considering what FOX Broadcasting President Peter Liguori just said:
Liguori started with talking about the value of content, in this digital age: No matter how sexy distribution is made out to be, it is just pipes…it was what you put into the pipe that matter. Skin and sports has always driven the content business. It is the message that makes the medium, and creativity drives the bottom line.
Distributors desperately need the content we all produce to keep them in business. It is that simple, it is that hard.
… the decision not to make an offer was wise.
Anyway, Revver will go down in history as a case study in missed opportunities. Revver launched before YouTube, and came after iFilm. Before YouTube became a common term, people would rush to iFilm to find clips. Embedding was out of the question… mind you.
Revver came along and made two inter-related decisions:
1- offer content creators / owners the opportunity to generate revenue from their work.
2- charge advertisers via the Cost Per Click (CPC) model where they only paid if someone clicked on their ads.
You can argue that one of these was a strategic decision, the other a tactical one. Frankly, either one of those could be both strategic and tactical.
At first glance, #1 is the strategy, #2 is the tactic; though it can be argued that creating a performance based ad model was the strategy.
All to say: Revver failed strategically because the CPC model for video content is a deeply flawed one, for two main reasons:
a) As I’ve highlighted many times, with text content, a reader leans forward, keeps hand remains on the mouse, scrolling down a screen, about to click on the next page, a related link or an ad; with video, you press play, sit back and watch the video. The ad interaction is very different.
b) Moreover, the mere notion that advertising needs to represent a positive ROI from Day 1 is crazy man’s stance. Advertising will always be ROI negative. Even Google’s much vaunted Ad Sense program fails to deliver positive ROIs for most advertisers, it’s just that is is more measurable and measured.
Ultimately, had Revver gone with a CPM model initially (it since adopted one) then content owners would have obtained a more decent return on their videos… allowing the site to aggregate more - and better - content, which in turn would have made the site generate a bigger audience.
I have no insight into the future of Revver. I don’t even quite know what Brad Greenspan’s plans are for his company let alone Revver… but ultimately, it’s not enough to have the right strategy or tactics, you have to understand that strategies need to be reinforced with the right tactics, and each tactic in fact has to be planned and executed strategically.
Say it ain’t so Hef! Apparently, Playboy is having some trouble.
Tycoon Hugh Hefner has been advised to cut back on staff at his multi-million dollar glamour empire as it struggles to cope during the global economic turmoil.
The 83-year-old has been told to lay off some of his staff at his Los Angeles and New York offices as soon as this month or go bankrupt.
The company has recently seen shares fall from £6.20 to £1.55.
An insider at the company told the Daily Star that bosses had been aware of the worsening situation for “a while”.
“Only the top brass has known for a while how bad things have been for Hef recently.”
I am not sure what will happen to Playboy, clearly, it remains one of the strongest brands in all of business, let alone media. I don’t understand why Playboy does not open up its amazing content (not the pictures, I swear) to online audiences. Playboy has conducted and published some of the best interviews ever, they also have a lot of comic strips etc., why on earth hasn’t Playboy had a free, ad-supported “clean” site (no nudity, basically) with pictures of somewhat dressed attractive women to go along a paid racy site with nudity, I do not know?
As well, Playboy sure could have been more aggressive on the M&A front. For example, why Playboy never approached to buy my old company AskMen remains one of the better mysteries in the world. There remain other sites today that Playboy can buy…
This got me thinking to the broader question, do advertisers embrace or shun racy content?
There are two trends, one being a general one in society and one being related to advertising:
- things that were once taboo are less so.
- advertisers are continuously behind trends.
Examples:
When I was at AskMen running ad sales, we began to move away from poker clients, for example… then lo and behold, poker became a pop culture phenomenon… everywhere on mainstream media and even advertisers (Degree for example being just one, who seems to have) began to jump on the bandwagon.
Then, I realized porn was becoming more and more mainstream. For example, we always knew we did not want adult content on the site… we even struggled with the decision to simply interview Jenna Jameson (I did the interview) - but before we knew it, Jenna was all over the mainstream media… and you see that slipping into mainstream media today, what with Britney Spears and Lindsay Lohan’s (and sadly, Chris Crocker’s, too) crotch popping up on cover pages of magazines.
I think the next, latest trend is extreme violence… look at mixed martial arts, the fastest growing sport in the US. Not to pass judgment (at all), but why is this becoming mainstream? Why? Because society is accepting this even though it’s simply shock value… which sells. Think Chris Crocker.
Connecting my two trends: advertisers are always behind the 8-ball. Another example?
Blogs blew up in 2003-2004. 2003 due to mainstream media not caring to cover the Iraq war and then 2004 because of the US presidential elections… yet the next year, a number of advertisers began to implement blogs in their campaign. One example? Captain Morgan, whose agency Real Branding did a “The Captain’s Blog” initiative…
I think society is [sadly] far more eager and willing to consume racy content and you will see more and more of it in years to come. Note, as well, that as European markets outgrow US growth… the US’ threshold for what is accepted will resemble that of Europe, not vice versa…
If I were looking for media assets, maybe I’d consider buying Playboy and making it far more Web centric.
the company has a market cap of $130M, with an enterprise value of $210M… but the crazy part is the company did $350M in revenues and $12M in net income. Not sure about the company going bankrupt, but maybe a takeover target?
Would Hef sell? Not sure, but his daughter Christine is running operations… judging by the largest holders, maybe Playboy might become in play.
SAI has a great rundown of Lehman… who allegedly had zero risk of going down a few months ago:
* This time, even debtholders could be hosed
* Paulson to Lehman: I’m not saving your sorry ass
* 99% of Lehman employees about to get royally screwed
* Fuld: I can’t understand why no one believes me
* Potential Lehman Buyers Hanging Fed On Own Petard
* “If We Don’t Get Bought In The Next 24 Hours, It’s Over”
* Bank of America Now Lehman’s Best Hope
* LEH Traders: “The Entire F*ing Street Wants Us To Fail”
* Lehman Now Desperately Trying To Sell Itself
* Is This the Day The Financial System Collapses?
* HSBC not buying Lehman, either
See more here.
VCs have a saying “we all make money or no one makes money”. All right, so that’s not the real saying… but the idea is: once the VCs make their dough back, then the entrepreneurs can get their money out, too.
There’s also a saying, to the tune of “everyone is equal but some are more equal than others”. That’s from Animal Farm, a story of the Communism Revolution depicting pigs. It’s funny that the animal of choice is the pig because when it comes to investing, we’re all greedy pigs, I presume.
Hearing the non-brouhaha over the fact that some VCs from Insight invested into Photobucket with their own money due to a lack of match between the company then and the firm’s target profile, I realized that sometimes perception is more important than facts. True, the fact is Insight does late stage deals and at the time the partners invested their own money, Photobucket had 3 employees, so it was obviously out of the VC firm’s investment profile. All right, is this a crime? Nope. The fund had no business to invest in a company like Photobucket. For the record, I once had a VC tell me that WatchMojo.com was out of his firm’s target profile but that he and his peers sometimes invested personally, prompting me to ask if he wanted to invest personally, to which he answered “double no” (I’m not making this up!). So the point I want to stress is: in a way, good thing the VCs invested because that at least helped the company and entrepreneurs… however, does that make it right?
In other words, it does pose a couple of questions and raise some issues:
- Should VCs be allowed to invest “on the side” if they are asked to investon behalf of school endowments, retirement funds and what not? It’s one thing for a lawyer from a big firm to do something pro bono on the side… but if you are to invest $1M and get back $50M (or anything in this scope), I think you have a choice to make. There are exceptions, and those are for the very best VCs for whom the rules can be bent (yes, I said it: there are exceptions to every rule and everyone).
- Going back to my first point: we all make money or no one makes money, is the adage that VCs use. Maybe I’m wrong… but VCs track record at getting exits - let alone high ROIs - has been bad. So if I am Yale or whomever else invests in Insight’s funds, I would have a major issue with this, even if sure, technically, we’re talking about a mismatched investment. In other words: “hey buddy, maybe you should take a pass on those “on the side” deals and focus on getting my money back, plus a hefty return”.
- Moreover, I love the part where the VCs say they spent a maximum of 15 hours on Photobucket… this proves once and for all that beyond a check, VCs have little to offer. Nice to hear the admission from a VC.
- Last but not least, who cares. VCs are not the epicenter of the moral compass, they will push dying founders off a bridge to maximize their stake and fortune… which sort of explains why this is a non-issue.
I wonder who is the person who forwarded this to Valleywag and Paid Content… now that is a better story.
My conclusion: stay away from VCs, call your banker… frankly, there’s no real difference between the two, the banker probably is less dangerous and one less person you have to keep an eye out on (seriously, I’m not making this up).
Read more on VCs:
- Why do Entrepreneurs Accept Draconian VC Terms?
- Biggest Mistakes VCs Make.
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