Ok, stop laughing.
When I read that MSFT will launch three products in one day, I can’t help but wonder.
I’ve owned MSFT back in the day and sold my shares. I’m actually considering getting into the stock again, here’s why:
- MSFT launched a competitor to Salesforce.com, I had long ago written that Google could bundle a bunch of its apps and launch a Salesforce.com killer. It didn’t, and in fact partnered up with Salesforce.com.
- MSFT’s Silverlight is also a promising platform to take on Adobe and Flash (probably more, too). The thing is, Flash video became ubiquituous largely via YouTube. When we launched WatchMojo.com we adopted flash as our publishing format, and as late as summer 2006 it was not an obvious choice. Today it is. But we’ve consistently seen a) early platforms fizzle out to an alternative platform and b) MSFT catch up a competitor. Could Silverlight suck out some value out of Adobe?
Of course, I myself might want to lay off the MSFT koolaid, I’ve criticized Redmond for being too envious of others:
- Video games vs. Sony, Nintendo
- Music players vs. Apple, Sandisk
- Portals vs. Yahoo!
- Search vs. Google.
And, oh yes, Google is also trying to eat away at MSFT’s software business by making it free and taking it online.
I’m not saying I suddenly have become bullish on MSFT, but I think that with Google at $165B and Yahoo! being somewhat comatose, MSFT at $292B seems like a growth oppoortunity.
All right, that’s the fatigue kicking in…
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WatchMojo NewsletterHow much is too much money? If you’re running a business in SF, NY, London, you need a lot of money. It’s not just fixed costs that are killer, naturally labor costs are also much higher than they would in a smaller market.
Yesterday Marc Andreessen announced that his latest company Ning raised a massive $44M for a post money valuation of over $200M. That’s a lot of money for a company in a space that has yet to prove it can generate substantial revenues. In other words, the only successful companies yield exits that come in the shape of an M&A, and these are scarce despite the big headlines.
MSFT’s Don Dodge - who’s worked with some of the most notable startups, well, ever - pointed out the lunacy in the numbers. Of course, he was quick to add that Andreessen is one of the few entrepreneurs whom you can trust with such a valuation. Jason Calacanis who recently raised a rumored $16M on a $100M valuation is, like Andreessen, in the “seize as much as you can” camp.
I don’t mean to knock neither Andreessen or Calacanis, but their advice is somewhat irrelevant to an entrepreneur who did not, well, create Netscape or sell his startup to the company that bought Netscape!
Anyway, I’ve long stated that massive valuation don’t help, neither do low ones. Everything taken to the extreme will come back and bite you.
My first Web experience ended up doing a valuation at $40M in 1999. Little, if any, cash exchanged hands, but what that deal did was put the founder (my boss) in a corner because by 2000 no deal made that round look smart.
My second Web experience ended up doing a very low valuation. In many ways, it put the founders in a corner because they were shell-shocked into diluting in a further round. Ultimately, despite having a stellar business on paper, the company only fetched $13.5M in a sale for 12 times EBITDA (the mean was 15.9 times EBITDA, don’t ask).
Neither one of those cases were ideal, and both cases, the founders got squeezed in one way or another. My gut says the right strategy lies somewhere in between: if your valuation is low, you’ll regret it pretty quickly and won’t be comfortable raising more money even if you need it; if your valuation is high, your financiers might block deals that might seem rich to you. A Series A investor likes a 10x return, a Series B or C wants to see 5x return (according to Dodge’s post above).
For the record, the second company returned 27 times on a convertible deal. I generated $8M of approx. 10M in the company’s sales… because my background in sales, business development, marketing and finance, I’m not too keen on doing a financing round that does not make sense for the financier and the founders. Of course, running a company that is 75% content and 25% technology (just because our media business is that strong, of course 
- means that VCs are not really even the best fit… but I do advise some entrepreneurs formally and informally and I don’t think that you should ever accept terms that you are not comfortable with…
Frankly, I advise people to look at the financing challenge differently, the good thing about media, for example, is you can hit ad revenue sooner than securing licensing revenue if you’re a tech company. Bottom line, you should also look at costs in a different light. In my experience, apart from the gaga Web 2.0 crowd, most companies don’t really have much traction in sales or business development until they have a meaningful business to show off, so in the initial months, why even bother setting up shop in SF or NY?
I think moderation is key.
But when you see some successful VCs come out and urge lower valuations, it makes you wonder, what is broken: the entrepreneur’s mold or the VC’s?
Related:
Yesterday I asked who will ultimately win the TV vs. Web video tug of war. The winner won’t boil down to resources naturally, since old media trumps new media on any given day. The outcome will boil down to speed, agility and who will be more aggressive. My argument has long been that TV folks won’t jump nearly as fast into the Web because the economics won’t justify once the hype wears off: yes, YouTube envy is omnipresent, but that doesn’t mean a TV network will cannibalize the $75B TV ad market for a $500M one. And that’s just ads, tack on syndication and filmed entertainment and TV is actually a $250B market in the US. The Web? Not quite.
But as TV executives see the writing on the wall, many have began to jump ship (right before being pushed out, would argue Valleywag).
Revision3 which raised $8M in funding just lured PC Magazine editor in chief Jim Louderback.
Of course, while the growth and excitement is clearly online, Web video is not a given yet, otherwise CNET would not have allegedly lumped off its video team (disclosure: I have, in the past, approached CNET about working on video initiatives with them and our web video unit WatchMojo.com).
Anyway, time will tell what pans out, but let’s hope that both TV and web video players keep a cool head, because as sexy as video is these days on the Net, it’s no slam dunk.
This past Saturday I asked if MSN would leverage Live Earth like AOL did a couple of years ago with Live 8. I guess the answer is: YES.
MSN said it had set a new record for the “most simultaneous viewers of any online concert ever,” with 10 million streams.
The event represents a “milestone in live Internet broadcasting,” said Joanne Bradford, MSN chief media officer. She predicted “an even greater number of streams” as viewers return to watch on-demand footage of the performances of about 100 artists, which will be available at LiveEarth.MSN.com for the next several weeks.
This landmark in streaming volume was driven not by technology but by people’s interests, noted Brad Shimmin, an analyst with industry research firm Current Analysis. “What interests me more than these sheer numbers,” Shimmin said, “is the global participatory nature of the Internet,” and the impact that is possible from the “dissemination of music.” He said the record would probably tumble “in the near future” in events hosted by Yahoo, Google, or directly by MSN itself.
Read more.
Last week I asked if Web 2.0 was becoming a farce and today there’s a mighty strong argument to suggest that yes, indeed it is.
Bay Partners, a VC with too much money on their hands apparently, must have just gotten poked on Facebook, got excited and is now launching a “facebook-apps-only-fund”. I can barely contain myself from laughing.
First off, let’s get this straight:
The program, called “AppFactory will be making up to fifty investments ranging from $25,000 to $250,000. Salil Deshpande says that they have preferred deal terms, but are willing to consider making equity or debt investments, and will work with co-investors as well. Basically, they want to help entrepreneurs build and monetize Facebook applications with a minimum of hassle.”
Then, in explaining the rationale on TechCrunch’s comments section, Deshpande says:
We think that incorrect conclusions are being drawn from the unmonetizability of some apps that have spread fast on Facebook to date. Some of those apps will always be unmonetizable. But meaningful apps will be monetizable just as meaningful web 2.0 websites are monetizable.
Hmm… unmonetizability, not a word. In fact, not even a single result pops up. Which might be a sign of things to come for this portfolio.
Madness. Where are the thinkers questioning this? Facebook is great, but people, why not encourage entrepreneurs to build something tangible? Why even bother wasting my breath…
Related:
- Facebook 100M users, a matter of when, not if.
- Facebook OS: Be careful what you ask for.
- Facebook: IPO vs. M&A.
- Facebook’s 2008 to do list: File for an IPO.
- Should MSFT Turn its Attention to Facebook?
- Peter Thiel: Facebook is Worth $8B.
- Murdoch: “MySpace worth $6B”, if so, then break up FIM!
- Facebook to be worth $2.35B by 2010.
