The Globe and Mail article "Inside the fall of Blackberry: How the smartphone investor failed to adapt" which appeared yesterday, is an interesting and in-depth look at the mistakes made by the smartphone company that led to its downfall. It's a good article and worth a read. Here's the link: http://www.theglobeandmail.com/report-on-business/the-inside-story-of-why-blackberry-is-failing/article14563602/
CNBC has posted an article and video of an interesting interview with Marc Andreessen, co-founder of the venture capital firm Andreessen Horowitz. While the article covers the main points, I recommend watching the video as it provides a fuller sense of Andreessen's thoughts. In the video, Mr. Andreessen discusses the following:
Link to the article and video:
Glenn Solomon, a partner at GGV Capital who also has a blog Going Long, yesterday posted an article on Fortune called "Is your Company IPO ready" that I found interesting. Rather than focusing on whether a company has a $100 million revenue run rate, which many banks used to use as a metric (along with several quarters of profitability), Glenn identifies three key attributes that the company must have to go public: (1) predictability and visibility; (2) underlying growth potential; and (3) no single points of failure (no significant vulnerabilities). It's a good and useful article.
From my investment banking days at Bear Stearns and CIBC Oppenheimer during the Internet bubble, these points ring true. However, while these may be three key attributes that a company must have in order to go public, they are by no means the only attributes a company must have in order to be ready to hold a successful initial public offering. Other attributes could include a phenomenal management team, differentiation from competitors, strong IP portfolio, impressive and consistent financial performance (for most tech companies this is rapid revenue growth), real cash revenues (no reciprocal agreements), operating in a large, rapidly growing market, sterling reputation, well-developed internal business processes and controls, and on and on. And while a tech company may not need $100 million in current revenue run rate to go public, they should be close (for example, a $20 million revenue run rate won't do it, but if a company has all of the other attributes, perhaps a $70 million revenue run rate might be sufficient). There are a lot of pieces to the puzzle that are required to fit for a company to be ready to go public and have a successful IPO, and the three attributes that Glenn identifies in his article are essential.
Here's a link to the article:
Dell Inc. is going private in a $24.4 billion deal led by Michael Dell and private equity firm Silver Lake. This is the largest buyout since the financial crisis and the biggest since Hilton Hotels were acquired by Blackstone Group in the summer of 2007 for $26 billion. Michael Dell is rolling over his existing 14% equity stake in Dell and will contribute additional cash from his private investment vehicle, MSD Capital. Microsoft Corp. is loaning $2 billion to the deal. Additional debt financing will be provided by Bank of America Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets. The sponsors are offering $13.65 per share, which represents a 25% premium over the stock price when the news of the discussions leaked out, but a small premium over recent trades.
Dell is the third largest personal computer maker, behind Hewlitt Packard and Lenovo. By going private, Dell will have more flexibility to transform the business that he started while he was in college in 1984.
Links to articles:
NY Times DealBook: http://dealbook.nytimes.com/2013/02/05/dell-sets-23-8-billion-deal-to-go-private/
Reuters recently had an interesting analysis on knowing when to sell tech stocks. In "Analysis: For tech investors, it's hard to know when to bolt" the article identifies a couple of signs of when it might be time to consider selling shares in a tech company:
It's an interesting article and worth a read.
There's an interesting article by Sarah Mitroff on Wired.com today called "Hardware, the Ugly Stepchild of Venture Capital, Is Having a Glamour Moment." The article explores some of the historical reasons that hardware investing has not been especially popular for venture capital investors (capital intensity, market demand identification, sales issues, etc.), as well as why some venture capitalists are becoming more attracted to hardware investing (costs coming down, it's becoming easier to determine market demand, etc.). It's an interesting article and worth a read. Here's the link:http://www.wired.com/business/2012/12/hardware-funding/
There have been a number of interesting posts recently about the changing environment for consumer Internet companies:
Fred Wilson's "What Has Changed" which provides his thoughts on the changing funding environment for these companies. He lists three developments that have made it harder for consumer internet companies to get funded:
Another post, "R.I.P. Frothy Times, A Return To Normalcy" by Alexia Tsotsis on Techcrunch.com, also discusses the increasingly difficult environment for consumer internet companies. According to the post (citing Dow Jones), investment in consumer internet companies is down 42% in the first nine months of this year compared to the same period last year.
These posts echo what I've been seeing in the industry. I would add that the public markets have been especially harsh on companies that disappoint (Groupon, Facebook, Zynga, etc.) and that IPO buyers are more scrutinizing, making it harder for consumer internet companies to go public. Another impact is that under FAS 157 (ASC 820) guidelines, funds may need to mark down some of the consumer internet companies in their portfolios based on the poor performance of public comps.
"What Has Changed" by Fred Wilson:
"R.I.P. Frothy Times, A Return To Normalcy" by Alexia Tsotsis:
"Silicon Beach" is a three mile stretch of oceanfront from Venice to Santa Monica that is becoming an increasingly popular area for LA startups. A couple of recent articles have discussed this trend. Today's Bloomberg article "Silicon Beach Draws Tech Startups to L.A. as Rents Jump" discusses how startups are finding interesting office space near the beach, and how cheaper rents and the beach lifestyle are attracting startups. Another story a few months ago "Silicon Beach Emerges as a Tech Hotbed" also discussed this trend. Both are interesting articles and if the trend continues, LA could attract even more venture capital.
The recent New York Times article "How Big Data Became So Big" explores the meaning behind the term "Big Data" and its evolution. It's a good article to help one understand how the term Big Data came into being and what the term means. Here's the link: http://www.nytimes.com/2012/08/12/business/how-big-data-became-so-big-unboxed.html?
A recent Wall Street Journal article "Social-Media Stock Frenzy Fizzles" provides an interesting look at public social media companies and some of the concerns that investors have about the business models. The poor stock performance of the public companies has brought down the valuations of private social media companies as well, according to the article. A worthwhile read. Here's the link (may be behind subscription firewall): http://online.wsj.com/article/SB10000872396390443477104577553431459135876.html