Stumbled upon this interesting article from Mike Speiser, LaserLike, on why a Yahoo or a Google should be looking into getting their hand on Twitter.
He says "Twitter has the potential to offer a major search vendor the ability to not only inject real-time content into search results, but also to offer high-quality metadata to tune the ranking algorithm".
More here http://laserlike.com/2008/11/14/why-google-or-yahoo-should-buy-twitter/.
Implications of Climate Change on Corporate Valuations
Yesterday I attended a talk on "Effects of Climate Change on Corporate Valuations" hosted by ICFAI ( the providers of the Indian CFA degree) at the IMA Convention Center in New Delhi. Sandeep Singh, an alumni of the institute, presented his perspective on how climate change is proving to be an important variable in determining corporate valauations across the developed countries and its impact on the industrial sector in the developing ones in the years to come.
The talk gave a very general overview of the issue at hand. I was expecting to see more of the finanacial stuff -like some number crunching on how CER's get valued etc etc ( and the other reason was to give Priyanka some company :P ). I already knew about a lot of this stuff beforehand based on all the discussions that i have been having with my younger brother Umesh lately. He just started a venture, called e-cube infra services pvt. ltd. , which plans to provide a gamut of services ( financial , cdm project management , product marketing etc ) to providers of green technologies and end consumers alike. I am planning to get him to write a quest post on this blog on his vision around e-cube, something which i am really very very excited about.
Coming back to the talk, post wihch i had some great discussions later with folks there that made the commute between Gurgaon and Delhi definitely worth it. Most of the information on the slides were from an article that was published in the McKinsey quarterly recently. Those interested can find the article here.
Would love to hear your thoughts on the subject.
Is the VC model broken ?
After having read a series of articles in the last one week or so makes me really wonder if the VC model is completely broken. It was a presentation that Adeo Ressi, the founder of TheFunded,the site that lets people rate venture capitalists, made to at Harvard Business School that has triggered a series of posts from renowned venture capitalists and venture blogs alike with their observations on the current vc climate and the changes that one is going to see in the time to come.
Update Check this most recent article by Alok Mittal on the current state of affairs of the venture capital Industry in India.
Adeo Ressie through his presentation highlights that the vc model is broken and that it is harming the economy more than its doing any good for budding venture and entreprenurs. He notes that since the bubble burst of 2000, the VC's have raised more money than they actually should have been given based on the value they generated through acquisitions and ipo exits. He also alleges that the vc's have not done their part in helping new ventures thrive by being capitalists and investing most of their money into a select few ideas ( leaving about 90-95% of the ventures scouting for venture funding ).
Matt,VentureBeat, in his latest post "The VC model is broken" , while disagreeing with most of the points mentioned in the slide above, supports Adeo's claim that the overall economics of the VC model seems to have been broken due to a number of reasons.
The key reasons that Matt identifies for the bad state of affairs being :
- The early successes in the valley (Intel, Cisco, Genentech, etc) attracted so much venture capital after the late 1990s that VC became an official asset class that money investors around the world sought to get a portion of, which in turn led to too much money being swept in with too few deals happening which hurt the economics badly
- Larger companies had become smarter and put start-ups on their radar much earlier. Google, Amazon, Yahoo etc bought companies much earlier thereby making it impossible to see multiple billion dollar enterprises emerging which in turn lead to not so great performance from the VC funds.
- Greed. Pure and simple. To quote Matt "Good venture capitalists have an incentive to raise ever larger funds, because the 2 percent they get in fees on the funds can bring them millions of dollars in cushy salary and expense accounts (including private jets, at least in the good old days). But to put all that money to work, the investor can’t focus on early-stage companies, because those small companies can’t absorb enough dollars. So greedy VCs turn to invest tens or even hundreds of millions of dollars into each company. That’s why there was this rush to invest at the lastest stage possible, namely private equity. There’s major pain in that sector right now, because there’s no way for anybody to liquidate their investments. This is something we saw coming a while ago; we’re surprised people supported the Blackstone IPO; it was so obviously set for failure".
Fred Wilson, VC and Principal at Union Square Ventures and author of the popular blog A VC, in his latest post "Capital vs People" notes that those VC's who value people over capital will thrive even in these tough economic conditions, while those going solely after the markets will not be able to whither the financial storm and create value that justifies their existence in the first place.
I guess what he wanted to say here is that VC model is not broken and that there is a correction waiting to happen in the VC world, just like the one that we are witnessing today in the financial markets. Even though over the last 3-4 years hundreds of VC firms came into being and raised billions of dollars, the market reamins to be under served ( with 90% of the new ventures not having easy access to venture capital) . I wonder if we are going to see some of these VC firms shutting down shops in the next quarter or so being unable to raise additional funds ( its is being said that the VC market is shrinking year to year and that the total projected size for 2009 is in the tune of some $10 billion only).
I personally feel that the VC model is far from broken today and that it is a key element in being able to sustain the surge in entrepreneurial activities that we have seen in the last couple of years in India and other developing countries. The VC's need to be more tuned to the needs of the entrepreneurs and expand their reach to some 30-40% from a dismal reach of just 10% today. VC's can gain back a lot of the lost confidence by being transparent about their criteria of investments, connecting with the startup community often and helping nurture new ventures as opposed to putting most of the money in ventures where they see definite returns. I would love to see more VC's like Vinod Dham, aka 'Father of the Intel Pentium Processor and EMD NEA-IndoUS Ventures, whom i had the pleasure of interacting with recently, who are very passionate about doing the Indian startup ecosystem and about doing a Stanford out of the IIT's. Also I pretty sure in my mind that with better attention from the VC community and the industry alike, some of the premier Indian institutes have the potential to be on the forefront of some exciting technological innovation in the times ahead.
Would love to hear your take on the issue.
Update Check this most recent article by Alok Mittal on the current state of affairs of the venture capital Industry in India.
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