Archive for June, 2011


Interesting Discussion

I recently met with a developer who owns his own company  doing different projects around town. It was great conversation and idea sharing. We began to talk about different areas of IT and our ideas of what was new and up and coming.

One of the subjects we were talking about was mobile development. I think everyone knows that this is an area that is defiantly growing. If you are familiar with the different stages of technology growth, mobile development is somewhere in between the adoption and adaption stage. Companies are beginning to see the value in these applications and start allocating resources to take it to the next level. This brought us to another topic, The Cloud.

What is the Cloud?  Companies like Amazon promote and market their cloud system, and the appeal is that you can essentially backup what is on your computer, or on your server at work. Some companies are moving solely to the cloud for storage. To the average user it is this magical area in space that you can put stuff and not have to worry about it.

Here is what you have to understand about the cloud, it isn’t a mythical black hole wear stuff just sits. To have a cloud you have a data center with servers. It is simply a convenient way to store data, files, etc on someone else’s network. Now, the question that I think needs to be asked and/or discussed is around security. How are you staying ahead of hackers? What kind of firewall are you using? What does your down time look like? What is your disaster recovery plan? You can build a huge brick wall around your town, but what about that laser that can burn through brick?

With the cloud idea moving so fast coupled with large amounts of breaches in security by hackers, these are some legitimate things to think about. The security company that can quickly and effectively adapt will come out on top.  Security has always been an important business, but with the sophistication of hackers now a days it plays an even more important role.

 

Lumosity

Lumosity is a company that has created online games to help strengthen your brain. What exactly does that mean? Well, its said to improve brain functions like memory, problem solving skills, attention span, etc. It is widely studied that brain strengthening games and diets may have preventative qualities for diseases such as Alzheimer’s, Parkinson’s, Dementia, etc.  Here is the website of the new start up company that has just raised $32.5 million to take their company to the next level. Lumosity was created by scientists at neuroscientists at Stanford University. Here is the website so you can check them out…

http://www.lumosity.com/

I recently read an article by the Impact Achievement Group who just came out with a study  that talks about the disconnect between upper levels of management and the employees who are being reviewed.

What they found doesn’t seem to be all that ground breaking, but it provides for a good discussion none the less. 62% of executives and vice presidents felt  performance reviews reflect results. However 43% which consists of those who are being reviewed and/or are peers to the ones who are giving the performance review, felt the process was not as effective.

The difference shows a disconnect between upper level management and those being reviewed. The question is what is the right answer to fix this? Do executives get more involved in reviews? Do you have a focus group or survey your employees to see what kind of reviews will truly reflect performance? Or do employees just not like getting reviewed?

If you have an opinion please make a comment…

Here is the other side to the IPO boom. It looks like Groupon and Pandora are next!

 

How to invest in the social-networking IPO boom

What to know about Groupon, Twitter and Wall Street’s next tech craze

 By Rex Crum, MarketWatch

SAN FRANCISCO (MarketWatch) — Call it a wave or a bubble, or something else entirely, there is no question that initial public offerings of social-networking companies have taken hold of the minds — and wallets — of investors looking to get in on the next big thing in tech stocks.

As if any further evidence of that was needed, it was found in the May 19 IPO of online professional-networking company LinkedIn Corp. LNKD -1.44% , which went public at $45 a share, climbed as high as $122.70, and ended that day at $94.25 — a gain of 109%. Following that initial burst LinkedIn’s shares have settled a bit, trading at around $77.50.

TODAY’S TOP INVESTING TIPS | Research tools

Tech ‘bubble’ is on table at D9: Technology executives, including Groupon’s Andrew Mason (above, right), label the current frothiness in the Internet market as the early days of a boom, not a certain sign of a bubble. 

But the response to LinkedIn has set the stage for other social-media IPOs, including the anticipated stock offerings of the biggest of the social-media giants, Facebook, which is believed to be readying itself to go public next year.

On Thursday alone, online daily deal site Groupon filed to go public with an IPO aimed at raising $750 million, while streaming radio company Pandora set a price range of $7 to $9 a share for its upcoming IPO. And investors are also eager for IPOs that are expected down the road from the likes of Twitter and social-gaming company Zynga.

“For a while, an IPO wasn’t seen as a viable exit option. If the market is coming back to life, that’s probably a good thing,” said Bill Maris, managing partner of Google Ventures, the venture capital unit of Google Inc. GOOG -0.38% .

“It’s a commitment when you make an investment, and we want the companies we invest in to grow and be successful,” Maris said. Last week, for example, Google Ventures made an investment in Kabam, a social-gaming company that claims to have 60 million users. Google Ventures didn’t disclose the dollar amount of its stake.

Bubble trouble

While social-media companies are in the tech spotlight, so are questions about the enthusiasm for investing in the social-media sector. Looking at LinkedIn’s rocket launch, it’s worth remembering how shares of Internet browser company Netscape more than doubled on their first day of trading in August 1995. That IPO helped spark a dot-com mania that by early 2000 had investors swarming over dubious newcomers including online grocer Webvan and pet-products retailer Pets.com.

Is another Internet bubble on the way, or does the business of social-media companies differ significantly from the Web darlings that captivated the market in the first dot-com boom — and fell hardest in the subsequent bust?

Groupon, Pandora add to Internet IPO frenzy

Investor enthusiasm in the online sector will be tested again as Groupon files to go public and Pandora sets its IPO price. MarketWatch’s Rex Crum and John Letzing talk about what’s in store for both companies.

“Is this a bubble?” asked David Weir, chief executive of SharesPost, an online platform for investors to gain access to stock in privately held companies including Twitter and Facebook.

Weir doesn’t think so, at least when it comes to the pace of IPOs and the quality of the companies in the pipeline.

“If you look at the number of IPOs between 1990 and 2000, the average was over 500 a year, and during the bubble that was in the same ballpark,” he said. “Since then, there have been 120 to 130 on average.”

Weir said part of the decline in IPOs, especially among tech companies, is because companies are staying private longer and building up evidence of actually being able to do real business and generate revenue, if not profits off the bat, than was true in the past.

All of which makes these social-media outfits particularly attractive when they do go public. “There are fewer dynamic companies to invest in and that is driving the appetites of investors,” Weir said.

A New Bubble?

This is a good read about the debate on whether we are on the cusp of another bubble. One of the problem with these huge private companies is that when they go public their valuation is so high compared to their actual revenue and or profits. In other words the stock price does not accurately correlate with (as this writer puts it) “operating results.” I think he does a good job of shedding some light on this subject. After LinkedIn’s recent IPO I bet they don’t have this on their new “Top Headlines on LinkedIn Today” 🙂

Michael Arrington

9 hours ago

It was just a little over a month ago that I wrote “We’re In The Middle Of A Terrible Blubble!” – a post about the difference between the Internet bubble of 2000 and the “blubble” (as I call it) that we’re in today. The short version of the post is this: venture capitalists like to declare valuation bubbles to fight rising valuations, and the press eats it up because it’s dramatic.

in 1999 the Nasdaq was out of control crazy with no real relationship between stock prices and operating results. We’re not seeing anything like that today, partially because so few companies are going public. And many of the huge-valuation private companies, like Facebook, Groupon and Zynga, have rumored profits that would justify their lofty valuations. And while Twitter is still too cool for revenue, I’ve considered them the exception rather than the rule.

But the market has shifted in the last month since I wrote that post. Things that have happened in the last couple of weeks in particular are worrying me. Well, not exactly worrying me. But making me far less comfortable with the health of the startup ecosystem.

So I scratch my head at Marc Andreessen, who argued today at the AllThingsD Conference that there’s (still) no bubble in tech. His conclusions don’t worry me so much as his logic.

A key characteristic of a bubble is that no one thinks its a bubble,” he says, noting that in 1999, people were euphoric. “If everybody’s upset, it’s a good sign…I hope there are lots of bubble stories.”

Everyone wasn’t euphoric in 1999. There was lots and lots of talk of a bubble. See, for example, this 1999 NY Times story title “Is Frenzy for Internet Stocks a Bubble Waiting to Burst?” Here’s another article in Forbes. And there are lots, lots more.

That’s not saying much. As with recessions, any ambitious economist will predict a bubble every year. No one remembers the misses, but you get an awesome book deal when you’re finally right. “Declare a bubble early and declare it often,” as I said in my previous post.

But Andreessen’s argument that there was no talk of bubbles in 1999 is just wrong.

His other argument is that “It can’t be a bubble because the stock market isn’t acting like it’s a bubble.” Except for newly public LinkedIn, which has a 2,000+ P/E ratio. And ZipCar, which is yet to become profitable so it doesn’t have a P/E ratio, but it’s still worth a billion dollars on Nasdaq.

But the big companies, says Andreessen, still have reasonable P/E ratios. And he’s right. Microsoft was at 72 in 1999. Today it’s less than 10.

And that’s the best argument that things are still sane, because the public markets haven’t gone crazy yet.

There sure are signs, though, that those public markets are aching for a new tech stock bubble. Imagine if Facebook went public today. Think they’d hit a $200 billion market cap immediately? They’re at $75ish billion today on the secondary markets, so why not?

Google’s only worth $170 billion.

That’s the problem. The markets are dying for growth opportunities and they are going to jump on any tech IPO that smells like a winner and price that stock so high that it becomes a loser. The blubble in the private markets today can very easily turn into a real live bubble on the NYSE and Nasdaq tomorrow, and I’m not sure there’s anything that is going to stop it.

And that private company blubble is starting to look more like a real bubble, too. In March, Andreessen’s partner Ben Horowitz argued that private company valuations aren’t all that crazy. “In recent high profile private financing rounds for private technology companies with valuations over $1B, the valuation multiples were at or below corresponding multiples for publicly traded companies such as Google,” said Horowitz.

That was true then (except for Twitter), but there are deals being closed now that blow that argument out of the water. AirBnB, for example, will close a financing at a higher than $1 billion valuation. The company is awesome but they still have very low revenue and certainly aren’t profitable. And most interesting of all is that Andreessen Horowitz will lead the round.

I love Andreessen Horowitz’s swagger and willingness to place big bets on risky things. I just hope they’ve got more behind those bets than a faulty memory of what was happening in 1999 and an argument about private company valuations that they are singlehandedly making invalid.

And, really, they probably do. Because all signs point to a real bubble, probably starting later this year when a lot more companies start to go public. And when Facebook goes IPO, watch out. buy as much stock as you can and hold it for as long as you dare. There will be a lot of money to be made right before everything really goes to hell.