Tag: startups

Age before beauty when it comes to building successful startups?

Vivek Wadhwa for TechCrunch:

I have a few theories about why VC’s favor the young. First, VC’s tend to travel in herds. For the last decade, the herd has been all about the Internet. And Internet startups require a lot less sophistication and coordination than, say, a telecom gear startup, an enterprise software startup, or a biotech startup. Everything from the product development processes to sales processes are far more complex for these types of products. I also think that in its Web 2.0 infatuation, Silicon Valley has probably funded a huge number of companies that are really features and not companies.

Mr. Wadhwa goes on to say young CEOs might be easier to push around come term sheet time, and that they “don’t like the hassles of running big companies so they’ll let VC’s bring in adult management.”

There are certainly a lot of startups, particularly in the internet space, founded by 20-somethings. Many seem quite creative, but it’s worth defining creativity to start with. Is it simply coming up with a novel web-based service that hoards of people will join as long as it’s free? Or being able to identify a problem, often based on analysis of a lot of disparate conditions, and then assembling an answer. Seems to me there are a lot more potential customers willing to pay for the latter.

I look around and see good things happening, although some of them (maybe many of them) seem to be solutions looking for a problem. Nevertheless, I like this debate.

Editor’s note: I’m an “old guy.”

Web startups still throwing dice at ad models

NYT’s Claire Cain Miller:

During the dot-com bust, as the online advertising market dried up and the Web companies that had been buying most of the ad space went bankrupt, the people who start and fund companies in Silicon Valley began questioning whether Web sites could survive on advertising alone.

That moment of doubt didn’t last. The ad market revived and free Web services blossomed. But now, as advertising shrinks once again, entrepreneurs and venture capitalists are desperately seeking new sources of revenue.

Not only is advertising shrinking, but there is still inventory flowing into the online marketplace.

The constituents should have been begging this issue a year ago.

The Risk To Venture Capital And Startups From The Financial Crisis

A lucid analysis of the predicament facing VCs and their investments as a result of the liquidity crisis, from Techdirt/Mike Masnick. Included within is this:

Usually startups go through multiple rounds of funding, which the VC firm bakes into its calculations when doing the initial funding. That initial firm may not lead later rounds (in fact that’s rare), but it usually will participate, and now that may be more difficult. That could cause some VCs to push their portfolio companies to sell off or close up shop much faster than they normally would.

The statement assumes there will be buyers around, and while that may be I suspect the spread between arms-length exit price (if there is such a thing) and liquidation price is going to close very very quickly now.

Is Google’s Proprietary Tech Stack Destroying Its Acquisitions?

Mike Masnick makes great points in this regard, the best of which is (emphasis mine):

So, for startups whose strategy is to get acquired by Google (and, I should note, if you start with that strategy, you’re probably going to fail)…

I have no opinion on the specific matter. But, just the other day a colleague and I discussed the fact that since Google has such an enormous (and ongoing) investment in proprietary computing infrastructure, they might be vulnerable to “evolutionary jumps” in computing technology some time in the future.

Give me an alternative to the ad model, and I might kiss your behind

Meanwhile, give me your kingdom, and I’ll show you yet another ad

Ashkan Karbasfrooshan gave a few good reasons why most startups clinging to what seems like the one and only business model, advertising, will soon hit the skids. The guy used to be an ad salesman – fair enough.

Meanwhile, Dan Frommer toots Tumblr’s new business model, which just so happens to be…no wait…why don’t you guess…uh…advertising? I’m pretty certain you guessed right.

Are there really that many advertisers ready and willing to throw money at what seems like a never ending and limitlessly growing supply of ad inventory? And on sites whose content is also limitless (and free), and which, when combined with their userbase, reflects so little intent to purchase?

The Techdirt folks champion the concept of giving away goods of infinite supply in exchange for goods of a finite nature (latest example here). Seems to me internet advertising might just be reaching that unlimited availability point.

Nimble startups suffering from Amazon S3 irony

Mr. Frommer says:

There’s a big future in distributed storage and computing, and Amazon (AMZN) is on the leading edge. Nimble startups benefit any time they can focus more on building their companies than building their server infrastructure.

I’ll add that some of the aforementioned companies suffering don’t have discernible revenue models (i.e. they are “working towards scale!”). It would seem that having to rely on cheap third party storage services might put a monkey wrench in that plan, at least every now and then.

Meanwhile, Markus Frind, who runs the highly profitable PlentyOfFish dating site on a quarter rack of servers (i.e. “scaling the bank account”), notes that Facebook is making heavy capital investments and coming up heavily cash flow negative as a result.

Where’s the happy median? Or has someone already patented it?

Picking a startup CFO

To be filed under “Fred Wilson’s Words of Wisdom“…

Look for someone who is a roll up your sleeves person who likes to engage with the other parts of the business. Look for someone who has been in a startup with growing pains before. Look for someone who can work nights and weekends. And be willing to pay them well. Because they’ll save you way more than they’ll cost you if they are good.

Quite possibly one of the most overlooked parts of building the C-level team (especially in tech, where CEOs and CTOs rule). And, that last sentence is one that most people can’t quite ever get their heads around.

The spirit of rational valuation

People are still hurting from the tech market bubble of the late ’90s, and they have since moved on to real estate. This is a good thing – the average Joe didn’t really understand what they were investing in (and I am not sure they do now either). They cannot be held solely to blame – it was the wide-open IPO market that gave them access to those tech investments in the first place. Not any more.
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How much is that startup in the window?

Depends on who is holding the purse strings.

World governments might be trying to dip their hands into the venture capital pie, or (more likely) they just don’t have a clue what they are talking about. What politico really does? The end result will be that they screw something up.
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AT Kearney Gives Gusto to Startups

AT Kearney recently completed a study where they found top executives at manufacturers, software companies, and IT services firms were determined to concentrate on nurturing existing product lines, rather than invest in new technology development. In Poll: U.S. has conservative tack on innovation, they say AT Kearney found roughly 90% of executives were concerned about “falling behind”, but were doing little about it. If that isn’t a tech entrepreneur’s call to arms, I don’t know what is.
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