Random Tumblr thoughts

The Tumblr user metrics were spectacular with:

• 108mm blogs and 50+ billion posts
• 76mm posts were created EVERY day
• In April of 2013, just before the acquisition, the website had more than 13B page views. 

The company was launched in 2006, so the exit in 2013, fits the timeline seen between start-up and exit. Of course, great success, or quick failure accelerates the exit timeframes.

New York has now seen two great exits in the last 12 months, Buddy Media and now Tumblr, Once 'lucky' and twice a trend. Capital flows to where it's 'appreciated'; NY has now generated the type of spectacular returns that investors will accelerate their moves here.

Kudos to Union Square and Spark. They first invested in an untried CEO, in an under performing technology City, and in an arena "social", which was not yet taken seriously. Viva the product guys and the investors who had a great deal of patience. As Chris Douvous said, moves like this are either career threatening, or career making.

Marissa Mayer is changing the culture at Yahoo. In the past year, she has now made 10 acquisitions and is bringing back an entrepreneurial spark to the engineering and product teams for this once proud franchise.
Tumblr absolutely fits her first acquisition screen, she wants Yahoo to be a part of your everyday online routine. You may scratch your head on the price, but this transaction is dead on strategy.

Carol Bartz, was the right CEO for a time at Yahoo, as she cleaned up the run away anarchy, held people accountable, and had a no nonsense approach. Though she was unable to, or was not given the time to articulate and execute on a grow the company plan, she did set a foundation for Marissa Mayer to do her thing.

For the success of the transaction, it's dangerous for the buyer and seller to highlight that Tumblr will be autonomous. Sure they should be protected from all the people who want to 'help', but it is essential that a MERGED singular entity put their best foot forward. Tumblr, now as part of a public company is no longer a science project, there's an obligation to earn revenues and profits. This can best be achieved with some help from the other parts of the company which are collectively earning quarterly revenues in excess of $1B.

Is Boxee Cable's Napster?

Hulu a leading site that streams premium TV content, announced that its content will no longer be available via Boxee (recently funded by Union Square and Spark).

In a short period of time, hundreds of thousands of people have expressed interest in Boxee's solution, that enables you to view movies, TV programs, etc., streamed from your PC and displayed on your HDTV. In a twist that Hollywood writers would deeply appreciate, it seems as if the warm market response became the ironic problem for this company. Similar to the way Napster, Bit torrent, and other pirates siphoned revenues from content providers, it seems as if the battleground is now shifting to Cable/MSO's. Make no mistake, these folk relish a good bloody fight.

The issue is that, with services such as this (and there are many services such as this), users can stream quality content via one cable connection to many TV's. Adios multiple set top boxes (perhaps, hasta la vista one set top box).Therefore, monthly subscriber revenue, which is much more powerful to these folk than advertising revenue, will be under intense pressure. It's similar to the problem newspapers have; no realistic prospect of replacing home subscription revenue with monetized CPM views. It's the ultimate existential threat to the status quo.

Safe to say, round 1 goes to the cable/content providers here. Nevertheless, the software/internet industry is known for being thrown out the door and coming back through the window. The technology barriers to entry for services such as Boxee are not that large. The question is whether this fight, which is really over 'business' model and legal use, will determine if we see a new generation of pirates, or will there be an accommodation that enables a new generation of legal innovators?

In hindsight, unlike YouTube, which experienced incredible hypergrowth, largely through purloined SNL content, Boxee had an early high profile and was rapidly attacked by the content/cable owners (fool me once shame on you, fool me twice...). No doubt this is a battle to see if the Wolf will survive.

U of Texas Investment Mangement Co (UTIMCO) reports on the value of their PE investments

Is a large investor in the Private Equity asset category. The folk at PEHub recently published UTIMCO's PE performance data here. In general, UTIMCO has posted reasonable numbers, certainly compared with the S&P index. One has to caveat these numbers as the returns embed a sizable number of investments that are not yet realized, and are subject to market vagaries.

You will see the data for such notable venture firms as Atlas Ventures (which missed its fund raising target), Austin Ventures, Spark (too early to opine), and Union Square (last fund seems to be a solid performer; latest is too new to comment on). I would expect that, in the near term, GP assessment of current value will trend down as the comparables have tanked. It is still too early for many of the funds recently raised to opine on the cash-on-cash or IRR numbers.

Incidentally, the publication of these numbers is precisely why many funds shy away from taking investments from public entities that have an obligation to report on the status of their PE investments. Certainly, in the venture capital business, one large 'win' can overnight change the outlook for an entire fund.

The 20 VC's most exposed to Web 2.0

Despite its alarmist titile, this piece in Silicon Valley Insider, does a good job outlining the 'exposure' of some of the notable venture firms to the Web 2.0 'mischief'. From my perspective, it's heartening to read the article as it highlights that the capital efficiency of internet companies seems, for the most part, to be a core differentiator between the Internet bubble, and the economy bubble we now face.

If this is the worst of it, then the venture community seems to have done a good job at harnessing capital to properly diversify into the myriad of technology arenas, or to hold capital to invest more deeply in winners. Of course, the big test will come in '09 when tough decisions will be made on which portfolio companies to support and which will be left for an inglorious demise.

Guilty as charged

During the past year I have been somewhat negative about the ability for young companies to build serious stakeholder value in the segment of internet video space so visibly pioneered by YouTube. My concern is that, despite plummeting costs, the value-add of recycling someone's proprietary content, or running adds against yet another silly pet trick was limited in an era of surging page inventory and limited innovation.

Yesterday, at Techaviv a gathering of Israeli entrepreneurs heard 3 companies present their offerings to a physical audience of nearly 50 people, plus a global audience of Techaviv members. One of the firms, Boxee, recently funded by Spark Ventures and Union Square Ventures, (HQ in NY and R&D in Israel) presented an innovative approach that automatically merges your personal digital assets with content available over the internet to present on your TV a greatly enhanced user experience. Complementing the merging of your data with external content is a social aspect where you are able to invite/follow your friends' media experiences.

The user experience seems neat in the demo (I have signed up for the alpha but not yet installed the service, so can't say for sure), but what really attracts me are three other attributes that are integral to building a wonderful business. The IP is built on top of the XBMC active open source community that minimizes core development expense, so they can devote their resources towards the application and UI (and license agreements with MP3 and other folk). Second, the company seems to be executing quite well on a low-cost viral seeding strategy hitting many influencer's and speaking at industry forums large and small. Finally, the small team seems totally driven and comes highly recommended.

I am not sure if this company will ultimately be successful. However, for a relatively modest amount of capital deployed against quite a large market opportunity, that interests many deep pocketed companies, it seems to be just the type of venture bet that the asset class should make.

One company is not enough to reform a skeptic; two though gives great pause. SundaySky is two year old company which has just released its initial product (company also started in Israel, and is moving HQ to NY), an infrastructure platform that enables a site to generate dynamic video on the fly. The promise is that professional quality video can be created for your site with no human intervention(other than professional services when you deploy the platform)...if this works, it will enable sites to substantially increase monetization of content or conversion rates for commerce; while lowering the costs associated with doing this. I am not yet sure if the business behind SundaySky will conform to the capital efficient model that is core to giving customers a true disruptive value proposition that I'm convinced will be embraced by true disruptor's, but at the next Techaviv session, the team will be presenting their solution and answering questions. SundaySky is funded by my friends over at Globespan Capital Partners and Carmel Ventures.

Goldman Sachs analysts feel growth is oversold in the market

Goldman Sachs technology analysts hosted a call today where they made the case that technology growth companies are trading at a relative discount, approaching 30% to 'defensive' companies with many EPS growth levers. outside of incremental margins garnered from revenue growth. Here is the link Goldman Presentation 111808

Get your own at Scribd or explore others:

Public company valuation is an underpinning of private company liquidity events, and a benchmark for investments too. This market reality seems to correlate pretty well with the advice many VC's are giving their portfolio companies to contain expenses, even at the risk of giving up market share.

The advice works well in the public markets, where it's easier to rotate in and out of your ownership position. In Venture, we tend to see a move of investment stage to the 'right' as a way to ameliorate risk profiles (where early investors seek to be adequately compensated via a risk premium) for their efforts. Other VC's remain true to form and concentrate on funding innovators (Union Square, Spark, First Round)