A few things that came to mind from the Facebook IPO:

• The bungling of the IPO (and poor performance of it, as well as other tech IPOs) may make exits for startups tougher, but in the end could be good long term for the industry, keeping them from having to appease too Wall St early in the company lifecycle

• The above may make the JOBS Act even more relevant

• The poor performance of the Facebook IPO may keep irrational exuberance about tech stocks and startups at bay

• If I were investing in Facebook, I would wait until their Q2 earnings, in which I believe they will show another quarter of revenue growth slowdown. Wall Street will freak out, the stock will go down, and a great buying opportunity will arise. The company has an incredible competitive moat, is the definition of a “network effect” business, and has a number of potential revenue streams that could prove highly profitable. That said, if they stick to display advertising as a business model, I don’t see a tremendously successful long term business. 

Speed and Simplicity

I had a brief Twitter exchange with Brad Feld about the topic. In fact it went like this: 

Me @bfeld: Could venture debt work for startups?

@bfeld to Me: No

So maybe that’s that :) But I’m not sure. Equity financing has clearly won in terms of early capital for tech startups for a lot of reasons that make sense, primarly due to the riskiness of these ventures. 

But I’d argue that some types of tech startups are getting less risky. Saas companies with recurring revenue, transaction based companies and e-commerce startups all may become candidates for venture debt.

These companies could preserve equity and more deliberately grow their businesses. Investors could get more regular returns on their investment. And this may limit the bubble/burst 10 year pattern that is seeming to play itself out now in the tech world.

..classified into one of these three categories:

• building robots
• using robots
• creating art

I use the term “robots” and “art” pretty loosely here. Robots meaning technology and art meaning stuff of cultural value.

For those in my generation, its important to make sure we’re learning to do one of these three things.

Note that this is definitely different than for angel/seed stage capital. 

• Scalable metrics. CPA less than revenue per acquisition. At scale.

• Large market and a unique positioning within it. How do you reduce the risk of a margin war?

• Signals of interest from others whose opinions matter.

Was reading today about a YC2011 startup called Convore that has recently pivoted from being a site for chats on any topic to an enterprise focused chat service called Grove.io. 

http://gigaom.com/2012/01/10/convore-grove-io/

It made me sad because, though I haven’t myself used Convore much, I thought it was a neat idea. Real-time chat built on the IRC protocol for anything, in a way thats easy and fun to use. 

The difficulty they, and many other consumer facing startups seemed to have faced is that their main monetization method would have to be advertising. And building a successful business with ads as the primary revenue source is VERY HARD. You need millions of pageviews and (IMO) you have to be able to demonstrate significant purchasing intent of your users. 

So they’ve pivoted to model charging business customers for something the casual user never would. And I can’t blame them. They’ve got a business to run, and bills to pay. 

And it raises the question of whether or not a consumer facing startup that doesn’t sell tangible goods can make ends meet without going to the well of VC (Twitter, Quora, Facebook, etc), and postponing the monetization process in favor of reaching the scale needed to sell ads. 

I’m not sure of the answer to this issue, but I sure hope theres a way. Otherwise we’ll consistently see enterprise software get better (good), but at the expense of cool new consumer software (bad). 

2 months ago I posted about my bets on public tech companies here: 

http://jimshook.tumblr.com/post/12328875045/groupon-ipo-and-other-public-tech-company-bets

As of 12:00pm today, 2 months later, it looks like I’m doing pretty well..

My portfolio: +11.7%

S&P: +2.1%

Beating the S&P by 9.6% ain’t bad. All stocks have shown a profit (short of Groupon being the best, followed by Google and Apple) except for LinkedIn which is down 23% (eek). Might have to double down on LinkedIn, as I’m still bullish on their long term potential (might take a while though). 

http://www.theatlantic.com/business/archive/2011/12/the-income-inequality-boom-its-very-real-and-its-happening-everywhere/249561/

The gap is widening between the rich and the poor (globally by the way, not just in the U.S.). This isn’t just a problem for the people at the bottom, but also for the people at the top, whose businesses rely on middle class consumers to buy products.

How do we fix this without an overt redistribution of wealth that wouldn’t play very well politically?

My idea is that the best long-term way to solve this problem is to ensure that every single worker has ownership (equity) in the company that employs them. 

One major reason for the rising gap in inequality is that rapid technological advancements have brought enormous productivity (and profitability) gains to companies, that only the shareholders get to see. Not the workers. Average wages have not kept pace with corporate profits. In fact, the only ones benefiting from these gains, and the global economy, are those who own the means of production (cue Marx rolling over in grave), and thus the profits. 

So my idea is to make sure that everyone has an ownership stake in the business in which they work (subject to vesting periods, etc). This is how much of Silicon Valley works, and look how that has gone in the last 20-30 years. 

Ownership further encourages workers to work harder, builds a sense of company community, and allows everyone, particularly the ones on the ground building the business, a way to participate in the financial success in the company.

Most of the jobs in the last 20-30 years of the modern economy don’t really do any of these things. Bankers, lawyers, middle managers.

Our economy is overloaded with middlemen, and I think this is one of the reasons many of the first world economies, including the US, are struggling.

So my new years resolution is to try to do at least one of the above 4 every day, even in a small way.

And..

Lets take a second to thank the teachers (teach), the engineers (create), doctors (help), and actors, athletes (entertainers), who provide value to our economy in a significant way. 

This is the best post I’ve seen that dispels the notion that the wealthy are “job creators” and that reducing their taxes boosts the economy. It has nothing to do with morals, or politics or anything else, just plain common sense. 

The world needs businesses, without question. Without them, we don’t have jobs. But even more than that, businesses need customers. If they don’t have them, they fail. If they do have them, they succeed, they grow, and they hire. 

Please take a second to read this and if you still think that the solution is putting more money in the pockets of the wealthy is more important than putting money in the pockets of the middle class spenders, then I’d love to hear why.

http://www.bloomberg.com/news/2011-12-01/raise-taxes-on-the-rich-to-reward-job-creators-commentary-by-nick-hanauer.html

This is for Mac users, but shouldn’t be too hard to do for other OS’s as well. 

1) Download this tool that shows you a visual representation of your folders on your Hard Drive: 

http://www.derlien.com/downloads/index.html

2) Click “Select Folder” and choose your Dropbox folder. It will show you what is taking up the vast majority of your space, which you can then remove from the folder and put on an external harddrive or delete. 

I recently posted a question on Quora asking how the company itself should be monetized. 

http://www.quora.com/How-should-Quora-be-monetized

The latest answer seems interesting, with the following possibilities: 

• User pays for reports on Topics
• User pays for speaker series conducted by influential members
• Advertise within this content (brought to you by brand X)

Other thoughts I’ve seen: 

• Sell credits that are used to ask influential people to answer questions
• Sponsored answers
• Company user accounts

I love Quora and think its the most interesting site on the internet. But if I were a stakeholder in the company, I’d be pushing a sale as soon as the trajectory looks as parabolic as it is going to. That’s because none of these revenue models are all that compelling. Slapping ads on the site can generate some revenue but won’t be sustainable long term (CPMs are going down, especially without purchase intent tied to the impressions), and I just don’t see their users paying much for premium content. Maybe a few $ here or there, but nothing that can create a highly profitable company. 

But, that analysis is strictly from a shareholder perspective and not from a user perspective. I’d love to see them stay independent, ad free, and not a department of Google. 

Will be interesting to see how it plays out…