John Battelle is looking for an executive to run Federated Media. A few years ago, he wrote:
I’ve learned what I am good at - starting things, getting them to a certain size. I don’t do so well at running ongoing businesses where the expectation is that lots and lots of money should be made. I find that a bit uninteresting (though others of course find it fascinating), and should the company get to that stage, it’s best to let the professional managers take over, whether that means selling … or bringing in someone who lives to manage media properties. I want to be upfront about that with everyone I might work with, so there you have it.
A couple of years ago, I wrote:
Say you were an entrepreneur and someone came to you and:- offered you $10M in funding but asked that you had to stay on for 3 years as a condition. Three years isn’t long, but it is an eternity online. YouTube went from URL registration to $1.65B in about 18 months…
- alternatively, what if someone else came to you and offered you $10M in funding but insisted you had to step aside and make room for their new hand-picked CEO.
Would you accept either offer? I think I would. Truth is, I think which offer you prefer has a lot to do with your state of mind.
(…)
Interestingly, if you wake up wanting to get the hell out of your company and do something else, I think because life is funny, then you are bound to stumble upon an investor who will tie you down forever as a condition of investing.
Alternatively, if remaining the captain was all you ever wanted and all that was important to you, I am pretty sure that someone would come along and insist that you make room for a new leader…
Trust me, life is odd that way.
(…)
In life, you usually want what you can’t have and when you have something, you want something else. Trust me, it’s just the way life works…
So true.
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WatchMojo NewsletterFrom Forrester, via Web Guild, the projected growth of online advertising:
If TV stays flat or shrinks (it will shrink) and the Web does what Forrester suggests, then my projection that online will surpass TV by 2021 is conservative.
According to Robert Hendershott, a professor of private equity and entrepreneurship at the Leavey School of Business at Santa Clara University, venture capital is becoming obsolete for Web start-ups.
Reason #1: VC’s Risk/Reward Profile is Unsustainable
I think venture capitalists are becoming obsolete because their risk and reward profile became unsustainable.
VCs will admit that they are looking for the home run, if not grand slam, when looking at companies to invest in.
But the thing is, in baseball, you can only win if you are willing to take a walk, get a single, double, the odd triple etc. When VCs prospect (look at pitches - both proverbial and figurative), they are constantly looking for grand slam pitches and swings.
More often than not, doing that ensures that you strike out or take too many walks. In baseball, you can win by getting enough walks. In the world of VCs - where you’ve raised billions from pensions and endowment funds, you can’t “walk” (sit on your capital). Smedley Butler used to say that war is a racket. I think VC is a racket: Many earn management fees and don’t have any successes to show for it.
But instead of aiming for a number of 2-10x returns, VCs aim for the proverbial grand slam but end up striking out more often than not.
Reason #2: Binary Outcome - Grand Slam or Stop Playing Altogether
The larger reason why VCs have become obsolete comes after they have invested in a company. Speaking to an entrepreneur who initially shunned venture capital in favor of angel financing, he mentioned to me that VCs have a binary outcome mindset where it’s either “grow and win quickly” or “fail”.
VCs, I thought, were supposed to build companies that last and adopt a long term view. In practice, it’s the opposite. But whereas in baseball a team commits to playing the full nine innings and even go to extra innings to win, when VCs realize that their bet was misplaced, they simply take the bats and balls and go home.
This all reminds me of the Casey at the Bat poem:
In the poem, a baseball team from the fictional town of Mudville (implied to be the home team) is losing by two runs with two outs in their last at bats, but they think they can win “if only” they could somehow get “mighty Casey” up to bat. Two weak hitters manage to get on base, and Casey comes to bat with the tying run in scoring position. The beloved Casey, Mudville’s star player, is so confident in his abilities that he doesn’t swing at the first two pitches, both strikes. On the last pitch, the overconfident Casey strikes out, ending the game and sending the crowd home unhappy.
‘Nuff said.
Time looks at some of the biggest failures in tech. It includes YouTube. Now this struck me as odd because a mere two years ago, Time dubbed You the Person of the Year, and by You it meant You on YouTube.
In fact, the list is actually compiled by Douglas A. McIntyre 24/7 Wall Street, a site I don’t read enough but which always impresses me when I do.
The list includes:
1) Microsoft (MSFT) Vista
2) Gateway
3) HD DVD
4) Vonage
5) YouTube
6) Sirius XM
7) Microsoft’s (MSFT) Zune
Palm (PALM)
9) Iridium
10) The Segway.
Some of these products and companies have come and gone (ie. bankrupt or acquired): Iridium, Gateway. A few are on their death bed: Sirius XM. Others technically remain to be determined (Palm, Vista).
But while overall this list is pretty accurate, I think lumping YouTube into the list is premature.
Back in November 2006 (so less than a couple of months after Google bought YouTube), I wrote a list on the Top 10 best Web acquisitions of all-time. I did not include YouTube’s sale to Google, not because it was good or bad, but because it was premature. I think that two years after that deal, putting it on a list of failures is akin to saying search is dead in 2000. After all, in 2000: Excite, Lycos, AltaVista, Microsoft and Yahoo! had all written off search as a viable stand-alone business and embraced portaldom. The one company that didn’t and stuck to their guns was Google.
I don’t think Google is the best company to be running YouTube (the entertainment destination) because Google isn’t as well versed in media as it should be to manage the world’s largest repository of video content (though Google is perfectly positioned to run YouTube, the world’s number 2 search destination).
However, it is premature to call YouTube a failure. In fact, I consider monetizing YouTube to be the greatest opportunity in business right now (any business, any region, any platform). Wireless? Speculative. China? Who says you can monetize anything there. YouTube: simple proposition and framework to make money.
But the company that has the best odds of doing that is the one who owns and controls it: Google.
Google paid $1.65B in stock to acquire YouTube, or 1% of its market cap. By doing so, it tucked away the number 2 search destination in its back pocket. How is that a failure?
Sure, it might be losing money now, but my gut says the company’s top line is growing at a healthy clip… and judging by its $20B cash hoard, while Google is willing to can irrelevant and unprofitable businesses, thinking long on YouTube will no doubt prove to be a smashing success (if only they just listened to me more, of course).
Note: YouTube is one of our distribution partners, and I have been known to tell them off in public or private channels on the odd occasion.
