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Silicon Valley’s Jobless Unplug From Tech aka Where Has All the Innovation Gone?

Unemployment in the cradle of America’s technology startup heartland is reaching epic proportions. Venture capital investing and exits have returned the level last seen in 1997. Yet the ingredients and conditions to launch capital light software or SaaS startups have never been better. Open Source software has replaced the need for expensive infrastructure software like database management systems, web application servers, content management systems, etc. There rarely has been a time in the market when so many qualified software professionals (engineers, marketeers, sales people, customer service, and even accountants) have been available. Finally, cloud-based data center solutions are cheap, reliable, and pervasive. In spite of all of these conditions, new innovative startups are rare. Perhaps Marc Andreessen was right when he said “The problem is that there aren’t valuable companies being formed. And there never have been,” Andreessen continues. There are, he says, on average 15 tech companies launched a year that will ultimately do $100 million a year in revenues, and these companies are responsible for 97 percent of the returns in the venture industry overall. “There just aren’t that many great founders.”

[ More ] August 3rd, 2009 | 1 Comment | Posted in Private Equity, Product Management, Venture Capital |

The Details Behind Amazon’s Valuation of Zappos

Cold hard facts make it much easier to understand Amazon’s acquisition of Zappos. Amazon’s recently filed S-4 provided a ton of fact based insight into the Zappos deal. This post helps you navigate through some of the more interesting sections of the document including the timeline of Zappos’ discussions with Amazon (hint 478 days between the start and end), the key factors that were used to value the Zappos business, the size of the now famous liquidation preference shared by Sequoia, Venture Frogs, and select executives (another hint – it was about $181 million), and copies of Zappos’ financial statements for 2007, 2008, and Q1 2009 (final hint – they were pretty good after all). Finally, there’s a roundup of a few other posts about the Zappos deal that provides some very insightful commentary.

Did You Know Mafia Wars & Zynga Are Generating >$200 Million a Year?

It was certainly news to me. It looks like Zynga is one of the first companies aside from Facebook and MySpace that have successfully monetized the social media market place. TechCrunch’s Sarah Lacy has written an excellent post about a potentially serious threat to Zynga and any other provider of ‘virtual goods’ that get exchanged in sanctioned or unsanctioned secondary markets. Click through to learn more about Zynga’s background, the serious threat that Sarah Lacy uncovered via an anonymous source from one of Zynga’s competitors, and how the Senate’s discussion today about imposing a 10% excise tax on plastic surgery might lead to the taxation of virtual goods.

Why Don’t Fortune 100 CEOs Care About Social Media?

It is simply irrelevant to them and there’s no upside. ÜBERCEO posted a couple of presentations on Slideshare that I admit I was link-baited into reading. The presentations do a good job of documenting the lack of presence Fortune 100 CEOs have on Twitter, LinkedIn, Facebook and Wikipedia. The pitches then exhort those CEOs to take advantage of the opportunities they are missing. What the authors failed to understand is that there is practically no incremental benefit and a lot of downside for a Fortune 100 CEO to engage in social media. The opportunity costs are simply too great. Two minutes to draft a witty tweet could cost a typical Fortune 10 CEO $2,800 in ‘revenue opportunity’. The impact of social media, however, for a more typical sized company between $100 million and $1 billion is a different story. The full ÜBERCEO presentations are embedded in the post, along with a few fun stats about the Fortune 100 CEOs as well as a summary of how Tony Hsieh’s Zappos grew revenues by over $140 million last year by using social media as one, of several, innovative strategies.

[ More ] July 19th, 2009 | 1 Comment | Posted in Management, Product Management, Social Media |

StartupBD

Did you ever wish you could leverage the BD experience of Half.com, eBay, or del.icio.us? Chris Fralic, a partner at First Round Capital gave a presentation at the recent DreamitVentures conference where he shared what’s worked and didn’t work during his 25 year tenure at these firms and others as well. Check out the full presentation inside the post.

[ More ] July 17th, 2009 | No Comments | Posted in Product Management, Venture Capital |

“Free:The Future of a Radical Price” or Irrational Exuberance?

“Free: The Future of a Radical Price” or Irrational Exuberance? Can you really build a valuable tech business where a core component of your strategy is to give away a significant part of your product or service for free? Chris Anderson’s new book “Free: The Future of a Radical Price” asserts that “People are making lots of money charging nothing. Not nothing for everything, but nothing for enough that we have essentially created an economy as big as a good-sized country around the price of $0.00.” This post synthesizes together a couple of excellent reviews of Anderson’s book from The New Yorker and the New York Times and combines it with my views about what it takes to build a valuable tech company today. While Anderson’s theory is interesting, it smacks of a lot of the same logic that was used to justify the Dot Com Bubble. There’s also an interesting postscript in which a writer for The Virginia Quarterly Review points out that apparently Anderson plagiarized several passages in the book from Wikipedia. The postscript contains Anderson’s explanation (citations were accidently left out during the last minute editing rush) along with his and his publisher’s plans to rectify the oversights.

Andreessen-Horowitz Core Principles & 5 Other Things Marc Said

What’s the thinking behind Marc’s latest $300M idea? Last Sunday Marc Andreessen and his long time partner Ben Horowitz launched a new venture capital firm aptly named Andreessen-Horowitz. Marc summarized his feelings about the current venture capital world in the following quote “The problem is that there aren’t valuable companies being formed. And there never have been,” Andreessen continues. There are, he says, on average 15 tech companies launched a year that will ultimately do $100 million a year in revenues, and these companies are responsible for 97 percent of the returns in the venture industry overall. “There just aren’t that many great founders.” Andreessen-Horowitz and their initial $300 million fund are designed to address this problem.

As part of the rollout both Marc and Ben did a number of media events. From those events we have assembled some interesting information – including the eight core principles of the new Andreessen-Horowitz firm, the role he and Ben plan on taking with the firm and their investments, as well as what they are specifically looking for in entrepreneurs and potential investments. Additionally, there were five additional comments Marc made in an interview with TechCrunch’s Sarah Lacy that provide some deep insight into his opinions about Twitter, Digg, Sarbanes-Oxley, and how many VC’s will go out of business in the next 5 to 10 years.

Top 100 Networked Venture Capitalists

Are DFJ, Sequoia, & Accel really the most effective VCs? TechCrunch’s Erick Schonfeld did an excellent summary of a 2007 academic study that examined how networked VCs were, as defined by the volume and nature of co-investing with other VCs and the value of the exits from those investments. The results are not too surprising but there are a few suprises in the top 10 — firms like First Round Capital and Dag Ventures significantly outperformed industry stalwarts like Kleiner Perkins Caufield Byers, Benchmark Capital and Goldman Sachs. Check out the list as well as the full academic study that was published in The Journal of Finance inside the post.

Facebook Marketing for Dummies

Paul Dunay is the Global Managing Director of Services & Social Marketing for Avaya. Prior to that he held senior marketing roles at BearingPoint, Nuance, and Scient. He is a noted industry expert on social media and interactive marketing. His blog, Buzz Marketing, is widely followed as is his passion for racing sailboats in the middle of the winter. Paul has just finished co-authoring a book called Facebook Marketing for Dummies that will be published by Wiley & Sons this summer.

Paul has just released an eBook teaser on his new project that I thought you might find interesting. Some of his ideas are pretty interesting. Check out the ebook inside the full post

[ More ] June 25th, 2009 | No Comments | Posted in Product Management, Social Media |

Orphan Tweets – A New Literary Form

Ever wonder about people who tweet once and never again? It turns out that there’s a lot of them. Many of their tweets, however, are amusing, ridiculous, or a bit poignant. Slate’s John Swansburg and Jeremy Singer-Vine just published a great piece entitled Orphaned Tweets: When people sign up for Twitter, post once, then never return. It’s kind of amazing that Twitter has developed into such a phenomenon that a literary form could be created from people’s one and only tweets. To ensure the ever growing repertoire of orphaned tweets the authors have coined a hashtag #orphantweet to let Twitters find and cherish other orphan tweets.


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