Silicon Valley's mood has turned to blues The overall mood of the country has now befallen many start-ups and investors here as well. Good business for Sherwood Partners. The company helps to shut down businesses in a graceful way. PEHub had an interview with co-founder Marty Pichinson recently:

How long does it take you to wind down a company?

If we restructure the company - try to save it, it's anywhere from 3 months to 12 months. If we close it, it takes up to a year because of all the legal ramifications.

Where are these startups, and their backers, going wrong?

Well, you've got to start bringing in companies like Sherwood early to work with managers and help shave off costs. It's all about extending the runway long enough that customers can absorb a product. Everyone comes up with this cockapoo about startups. It's not about being smart. It's about being around long enough.

Cutting costs, negotiating better - these sound like business fundamentals that a startup's VCs should be helping with.

This is what people don't understand: decades ago, when a VC put money into a Cisco or HP and sat there and worked with them, they were managing a $2 million fund. Now, with funds the sizes they are, do VCs really have the time to work with all these companies when they don't know which will be the winner? No.

Couldn't the answer be to raise smaller funds and back fewer companies?

VCs have to put money into so many companies. Who else is going to bet on ideas? That's what venture capital is. Did you ever think you could take a cell phone with you to Italy and talk with people as if you were home? Paradigm shifts like the kinds we're enjoying and will continue to enjoy cost money. I think the venture model is perfect the way it is.

You must be recovering from jet lag. Just kidding. You're working with a lot of Web startups, correct? What are you seeing?

A growing practice is companies that want to acquire others; they're calling us in to do an ABC [an assignment for the benefit of creditors], so they can purchase the assets while we're winding the company down. It lets the employees keep going. In other cases, we'll get a forebearance [the stay of enforcement of something like a debt or obligation that's due], so we'll get 90 days to get our arms around everything and come up with a plan, like give stock to creditors, which they like.

So VCs are squishing together failing Web 2.0s so they won't have to write off their investments entirely.

Sometimes, yes.

Is that a sign of trouble, or business as usual?

You know what I think? I think the economy, excuse my French, sucks right now. You have no secondary market for mortgages. You got an energy crisis that's killing us all. You've got storms and floods in the Midwest. Things are a mess, and we haven't seen anything yet. Q3 and Q4 are expected to be worse. Credit card debt is going to collapse. Hedge funds are dying. Limiteds are going to start suing everyone. It's a perfect storm, almost like mankind has never seen. Shit happens, but the venture model works.

After some months of thinking, drawing up ideas and fighting PHP code we have it up and running - TierOneAds. TierOneAds works as an aggregator for publishers and advertisers. We aggregate ad networks like Valueclick and direct advertisers which can sign up fully automated on TierOneAds.

Bloggers/ Publishers name us their price they are ready to sell impressions for. We then deliver impressions every time it matches our campaigns - if not we show the bloggers default banner.

No maintenance needed, No haggling with confirming/ accepting campaigns. It just works. Feel free to give it a try and let us know what you think about it.

Palo Alto, California - According to the recently published IAB Report on Social Media and Advertising (http://www.iab.net/media/file/2008_ugc_platform.pdf) advertising on social media sites generated $1 billion in revenue in 2007 and is expected to grow to 4.3 billion in 2011. However this marketplace is still proving a challenge for participants - advertisers and publishers alike.

Advertisers are looking for wide distribution and traffic that is high
in quality and converts quickly. Advertisers are challenged to find
and efficiently negotiate with the new wide array of blogs and user
generated content sites.

Publishers are seeking access to more advertisers with better quality
ads and higher payouts. Publishers find it increasingly difficult to
select the right advertiser offering dynamic pricing options and
manage inventory to improve overall payouts.

TierOneAds is an innovative solution that is designed to ease and
resolve this process of trial and error. TierOneAds lets publishers
define their price (effective CPM) for which they would like to sell
their traffic. TierOneAds is then delivering traffic that is matching
these bids. TierOneAds is right now building a pre-negotiated database
of thousands of high quality publishers across the globe.

TierOneAds provides advertisers with a simple interface to target a
wide range of social media sites with just one click. Advertisers pay
a rate based on
TierOneAds dynamic pricing mechanism and can track conversion
instantly. A wide range of targeting options makes sure that only
relevant users are reached. Already dozens of advertisers have signed
up.

TierOneAds strives to connect publishers and advertisers in a simple
and fun way.
TierOneAds mission is to make advertising simple and profitable and
allow publishers to concentrate on creating great content.

TierOneAds has been developed by
Creative Weblogging. The company, headquartered in Palo Alto, CA, was
founded in 2004 and has since become one of the the world largest blog
media networks with operations in the US, Germany, China and France
publishing nearly 200 premium blogs, updated by 300 editors around the
globe. Creative Weblogging works with leading brands and advertisers
like SAP, BMW and GM to create awareness and measurable results.

© Luciano Bello



Daniel Primack has found an interesting study about the role of founders staying in start-ups:

Is founder involvement integral to a company's success, or is his primary contribution found in the company's very formation? It's the old horse vs. jockey argument, and has been taken in a new direction by Hans Hyde of the University of Aberdeen Business School.

Hyde examined a sample of 6,800 companies formed in Norway between 1996 and 2003, which led to a set of approximately 12,500 unique founders. He then broke the founder sample into two sets: Founders alive at the end of 2005, and those who were dead.

For starters, Hyde found that 181 such founders fell into the expired category. Apparently one takeaway is that entrepreneurs have a 1.7% chance of dying less than a decade into their company's formation. That might sound morbidly high for twentysomethings in Silicon Valley, but the majority of Hyde's Norwegian entrepreneurs was over 40.

Moving on, Hyde found that companies with deceased founders underperformed those with living founders - but just barely. The former was five percentage points less likely to be in business four years after formation, while the results are even six years out. There also was no statistically significant difference in annual OROA (operating returns on assets). Hyde suggests that such minor differentiation could mean that a founder's death is more likely to cause an "adjustment cost" than a cataclysm.

The study was done in a special environment which may not really reflect a typical Silicon Valley start-up (at least the death rates should be different I hope!). However I'm surprised that founders had so little impact on improving the performance. Maybe the key ingredients in a startup are really the ideas and good managers for execution (which can be founders or others)?

My last flight over the Pacific gave me ample time to read through Jessica Livingstons collection of interviews.

It's good stuff and Jessica certainly got to the famous people. The interviews usually cover the founders insight on why and how they started their company. Most entrepreneurs give a humble account of their own success. Many recognize that thing could have turned out otherwise and each startup had their hard times and was bankrupt several times (with the exception of Flickr maybe :).

Nothing unexpected but striking in its magnitude is how different some business evolved. Paypal raised money on being a PalmPilot application to become the biggest online payment processors aided by a fraud detection mechanism nobody incl. the founders and investors knew they even needed.

For me the best interviews are Mark Levchin's honest and down to earth account on how Paypal made it work and Paul Bucheit's account of building Gmail and Adsense as an entrepreneur inside giant Google.

Some interviews are strangely boring or unreadable (i.e Steve Wozniak) or shine with self parading. However it's good stuff and if you are interested in setting out as an entrepreneurs it surely helps.

Fittingly before taking off to Hong Kong I was reading this new book written Bruce Dover, who worked for News Corp. (Star TV) in Beijing in the late 90s. It's a great insider story of Rupert Murdochs failed attempt to conquer the mainland. Most stories about Murdoch end with Rupert getting the deal done and transforming a long time money loosing operation into a global powerhouse.

Not so in China in the last years. Star TV - the satellite broadcaster who started out in Hong Kong never really got enough distribution (satellite dishes are still not officially allowed, though they exists rather plentiful). Murdoch had done everything right and has courted the Chinese leadership over a decade. But to no avail. A billion or more is lost. However Rupert Murdoch found his third wife in the China adventure and added two new daughters to the family.

So it's a happy ending after all :)

© Andy Hwang



I'm spending the week in Hong Kong helping to build Creative Weblogging's China business. Hong Kong has much in common with Singapore and Bangkok or KL. Hong Kong certainly is a small place where space is really precious.

Hong Kong also tries to redefine its competitive position. It has long been the worlds freest economy but the status as main entry port to China is gone as China itself has invested billions in improving infrastructure and reducing red tape. Hong Kong so far seems to do well - growing handily.

I have met expats and Hong Kong natives in the last days and all have been excited about the prospects and opportunities of China in general and Hong Kong in particular as an Asian Hub. While Hong Kong is small and features some unhealthy level of pollution it is still a great place to live coming from the US or Europe. All the services and chains you need are here and the place is run incredibly efficient. Many great destinations in SE Asia can be reached in a 3 hour flight radius - wonderful beaches in the China Seas or the Indian Ocean or business hubs like Shanghai, Singapore or KL.

So it's easy to share the optimism people express here about the near future especially with awakening dragon (who has not bitten Hong Kong's independent rule so far) just north of Hong Kong islands.

I'll certainly will come back soon.