Friday, October 05, 2007

Startup Showing to VCs

If you have a startup and would like to show your wares to a group of VCs gathered in one place at the same time, a really good opportunity might be the DEMO. Even Financial Times reporters notice it. So, for example, see this "Personal Technology" report by Paul Taylor: "Tailored for a small outfit," which reviews various startup technologies for small businesses.

Wednesday, September 19, 2007

Venture Capital for Web 2.0 Goes Even More Global

Financial Times reports global VCs are rushing to join the Web 2.0. This contrasts with a relative pause in the Silicon Valley.

Monday, September 17, 2007

Microsoft Secrets--10 years later

Michael Cusumano's Microsoft Secrets, although now more than 10 years old, remains a great study on the production of software on a large scale.

Cusumano's humble attention to details — carried over from his earlier studies of Japanese software factories and combined with his particular focus on the evolution of ideas on process, organization and the art of software production — gives a strange detective-story quality to Secrets.

The volume of interviews and quotes, mini case studies, historical reviews and multiple perspectives from within Microsoft, and the repeated return to essential topics from all these prespectives, make the book a highly valuable read. (Some have made it a required reading in software engineering courses.)

I will try to return to Secrets and Cusumano's other works here in the future, hoping to note some of the highlights.

Thursday, August 16, 2007

Funds for Buy-Outs

Martin Arnold reports from London than Buy-Out firms are still out on the hunt for funds:

Yet while their activity has slowed, big buy-out firms seem more eager to raise fresh funds in anticipation of a considerable buying opportunity, as the credit market turmoil cuts the price of companies they buy.

People close to several large private equity investors said that in spite of the credit market difficulties, appetite to invest in buy-out funds from longer-term investors, such as pension funds and insurance companies, was increasing.


Carlyle aims to raise €5bn for its third European fund, while Lion Capital and Barclays Private Equity are looking to raise €2bn each. CVC Capital Partners is yet to finalise its fundraising documents but is expected to seek €10bn-€15bn this year.

Nick Arnott, managing director of Private Equity Intelligence, which tracks buy-out fund performance, said: “They seem pretty confident, as some of the mega funds have been raising funds above their targets. Investors are still keen to increase their exposure to private equity.”

Thursday, May 10, 2007

Google Acquisition Style: Small As Well As Big

Google has recently made some major acquisitions:
Google paid $1.65 billion to acquire video-sharing site YouTube in November, it's biggest deal at that time. Then, a month ago, it announced a $3.1 billion deal to buy DoubleClick, which offers advertising delivery technology and services.
However, the Reuter's review of Google's recent acqusitions and executive pronouncements also reports that Google "still sees small technology deals as its primary thrust for buying businesses."

Looking into Google large acquisitive actions in the market make, one would conclude that Google sees itself primarily as a company that supplies content (through search or otherwise) and advertising space. Big acquisitions are meant to protect this turf. The big acquisitions seem to be saying that Google might use technology but is not about technology alone, just as neither Amazon nor eBay are simply about technology. So, it is a bit odd when Eric Schmidt, Google's CEO, reiterates "Google's oft-repeated stance that it sees itself as a technology tools maker, not a media content owner."

All these businesses are using technology to provide some very traditional services, which can be provided at lower transaction costs but higher volumes on the digital world-wide web.

However, the smaller acquisitions are rampant:
"In the past, we would buy businesses in lieu of (hiring) engineers," Schmidt said. These days, Google buys a start-up once every few days, or around one a week, he estimated. Two examples of this approach -- Keyhole (Google Earth) and Urchin (Analytics) -- had strong technical teams, a technology head start, and were bought relatively inexpensively in the hopes of later generating billion dollar revenue streams, he said.
That makes it more clear.

Wednesday, April 11, 2007

Seed Money

Douglass Belkin of The Wall Street Journal reports that Canada is changing its tax rules to extend a tax break to limited-liability corporations.

Because LLCs are excluded from a 1980 U.S.-Canada tax treaty the profits they generate are subject to taxation in both countries. As a result, the partners in LLCs are generally unwilling to invest in Canada. Canadian Prime Minister Stephen Harper is now seeking to amend the treaty to include LLCs and grant them tax relief in Canada.
U.S. private equity firms often partner with LLCs or are formed as LLCs -- or Limited Liability Corporations.

Monday, March 26, 2007

Silos or Centralization

Financial Times reports that Citigroup has made significant savings, moving from silos to centralized computing:

The group has tended to operate as a collection of “silos” without focusing on the opportunities to share costs, he argues.

However, significant savings have been made in recent years.

The introduction of central computerised purchasing is saving more than $500m a year and rationalisation of information technology is expected to yield about $2bn a year.

Mr Prince has made clear he is expecting Mr Druskin to come up with big structural savings rather than more trimming.

“We’re not looking for him to squeeze the rock in terms of magazine subscriptions or black cars,” he told analysts in December.

Saturday, March 24, 2007

To Start a Bank

If you want to start a Bank, read the recent article in Financial Times by Andrew Ward, who reports that
Almost 180 banks were opened in the US last year – the highest number since 2000 – with much of the capital provided by individuals rather than institutions.

De novo banks are flourishing in the US as a reaction against the consolidation that has halved the country’s number of banks in the past two decades.

.... But for such a safe investment, the returns can also be impressive. Between 2002 and 2005, banks with assets under $500m generated compounded annual return on investment of 22.6 per cent, compared with 8 per cent for the banking sector as a whole and 9.5 per cent for the S&P 500 index.

Such banks are better at lending to SMEs, Small and Medium-size Enterprises, who do not find equal service from larger banks. Larg bank loan officers, whose incentives seem to be connected to the size of their portfolios, may be less likely to attend to the needs of SMEs.

Georgia had the third largest number of bank start-ups in the US last year, behind California and Florida, with all three states gaining at least 20 new lenders.

We should be aware of the flip side of novo banks.

Chris Marinac, analyst at Fig Partners, an Atlanta-based banking consultancy, warns that competition is increasing among de novo banks at a time when the housing downturn and slowing economy are making lending riskier.

He also questions whether there are enough qualified executives and loan officers available to maintain high standards of management and risk control.

“A credit cycle has yet to truly test these new banks,” Marinac says. “As Warren Buffett says, it’s only when the tide goes out that you know who is swimming naked.”

Marinac believes most well-run de novo lenders will be successful in the long term but warns that their growing number is depressing the price potential acquirers are willing to pay.

The emphasis is mine.

Friday, February 16, 2007

Bonds and Interest Rate Risk

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As China becomes more daring with its $1.07 Trillion stash, what should we expect to happen? And, why is China becoming more daring to begin with? A recent article in The Wall Street Journal notes that
If current trends continue, the reserves could top $2 trillion by the end of the decade. That rapid growth has given China the confidence to rethink how it manages its holdings, because now there is generally agreed to be more than enough to back up the yuan in case of financial disaster.
First, interest rates seem to be heading up or at least seem to be staying at higher levels than previous years. China, therefore, is exposed to some significant interest rate risk, particularly as there's no end in sight in U.S. defense spending and economic cost of U.S. occupation of Iraq.

Given this environment, it makes sense for China to reduce its interest rate risk by diversifying its maturities and expected interest rates on its assets, currently held in U.S. treasuries, much of which came with coupon rates lower than those today.

As China unloads the bonds, their value will be reduced, further pushing yields higher, first in the shorter maturity bond markets and perhaps later, depending on the extent of China's diversification, in the longer maturity bond markets.

Scholars suggest China could spare perhaps $200 billion or $300 billion from its reserves for more aggressive investments.

Even a slight shift of this type could have a significant impact in U.S. markets. China has long been one of the biggest buyers of Treasury notes, making it in effect a major lender to the U.S. government. China's buying has helped keep interest rates low in the U.S.: The greater the demand for a country's bonds, the lower the interest rates the country needs to offer.

This story promises an interesting unfolding!

Monday, February 05, 2007

Beatles and Apple

Beatles and Apple settle a historic trademark lawsuit.

Story of Start-up Gone Bust

Sony buys 28 patents from Ipix for $3.9 and concludes the story of a start-up gone bust with $544m cumulative debts.

Sunday, February 04, 2007

Long-Short Investing

Apparently, "long/short strategies are the most popular type of hedge fund, accounting for 40 per cent of hedge fund assets." There are also those who stay with hedge funds focused on long investments, according to other reports.

Saturday, February 03, 2007

U.S. Takes China to WTO Court

Financial Times reports that U.S. has taken China to the WTO court.
The US filing alleges China “uses its basic tax laws and other tools to encourage exports and to discriminate against imports of a variety of American manufactured goods”.

Real Estate Investment

If you're serious about real estate invest, you will find David Crook's The Wall Street Journal Complete Real-Estate Investing Guidebook a useful read. It captures many of the essentials. For greater details, I recommend Brueggeman and Fisher's Real Estate Finance and Investments.

Sunday, January 28, 2007

Lessons of Flickr

Financial Times has a short story about the lessons of Flickr as a startup and "the rise of a new kind of Internet entrepreneur."

Dependence on outside funding seems to be waning, open-source tools lower "barriers to entry for aspiring web entrepreneurs," "start-ups do not need to break the bank to create an IT infrastructure," blogs and other social networks provide efficient out-bound marketing, and "the latest generation of internet entrepreneurs have plenty of exit options available."

Marsh's Harsh Review

Rob Marsh writes a harsh review of Paul Arden's Whatever You Think, Think the Opposite. I did read the book last week and found it had some redeeming qualities. Marsh may be expecting too much, and Arden may be delivering on something other than what Marsh seems to be expecting.

Mobile Ads

A recent Wall Street Journal article by Amol Sharma features AdMob's system for placing ads on content directed to mobile users. (Subscription may be required to view this article.)

AdMob connects content providers and advertisers. Since advertisers cannot negotiate with individual operators or content providers for ad placements, AdMob has a market position well-suited for growth.

Under AdMob's system, as with Google's on the Internet, advertisers pay
only when a user clicks on the link. Advertisers go to AdMob's Web
site, fill out a form, and make a bid for a click in one of several
categories, such as news, entertainment or communities. The bids for a
click generally range from five cents to a dollar.

Surveys show that reception to mobile ads remains mixed even when some benefits accompany an expressed willingness to view the ads. Consumer studies completed in August of 2006 show that some 51% of mobile users do not want to receive any ads at all even if they can get free applications for their mobile devices.