Archive for the ‘equity’ tag
To reference Marilyn Monroe, a good developer is hard to find. Which is why startup 500friends is deploying a disruptive new recruitment strategy to lure the most talented developers out there.
500friends posted a call for “entrepreneurial hackers” on Hacker News, a social news site with roots in YCombinator. In addition to the usual pledges of high salaries, equity, cool company culture, and opportunities for growth, 500friends is offering developers seed capital. After two years of employment and a proven record of quality work, aspiring founders will have the opportunity receive between $25K and $50K to start their own companies.
Thus far, this fishing tactic has proven effective. The company has been able to hook engineers away from Facebook and Google and over 50 qualified applicants have responded to the bait.
The mastermind behind this scheme is 500friends founder and CEO Justin Yoshimura. He is currently growing his team and wants to ensure that he not only finds people with strong technical abilities, but who are also ambitious, motivated, and hard-working.
“Like any startup, we want people with problem solving abilities,” said Yoshimura. “Entrepreneurs are people that can identify a problem, explain it coherently, and propose a legitimate solution. We want people willing to take ownership over their part of the product and make it succeed.”
This strategy works in multiple ways. First, it helps 500friends outmaneuver the competition. Secondly, it increases the likelihood that the employee will be loyal to the company for at least two years. Performing at a high level is heavily incentivized. In order to achieve their ultimate goals, employees have to give it their all. In return, 500friends will see positive returns as well.
“A really great engineer is typically 10 to 20 times better than an average engineer,” Yoshimura said. “Average engineers are much easier to find, but if you get someone really great, they are going to do things more efficiently and there will be a better user experience. Whatever you are building, whether it is for the web or mobile or hardware, those people are the real innovators behind the scene.”
It takes more than coding skills to be an entrepreneur. In some ways, working at 500friends resembles an incubator program where employees can learn about other aspects of the business, acquire relevant skills, and be tapped into a network. Developers have the option to sit in on sales meetings, marketing discussions, and learn about product management. Yoshimura also said he will take the time to hear his staff’s ideas, help draft pitch decks, and make investor introductions.
Yoshimura made it clear that this money is not charity. In exchange for the investment, 500friends receives equity, which means that there is a vested interest in seeing its “portfolio” companies succeed. All in the all, the arrangement seems to work quite nicely for everyone.
The idea was precipitated after the company raised $4.5 million a few months ago. Yoshimura began hunting for developers and realized he would have to do something different to build his dream team.
500friends is a social loyalty platform that helps online retailers identify their most valuable customers and incentivize them to generate the greatest returns. It is for companies that already have a dedicated client base, but want an even stronger one. 500friends is backed by YCombinator and officially launched in April.
The company currently has 30 employees, but as it has made abundantly clear, is looking to add more big fish to its pond.
Filed under: VentureBeat
The funding comes in the form of convertible bonds raised from Icelandic institutional investors, according to Chief Financial Officer Joe Gallo. Founded in 1997, CCP previously raised $20 million in equity financing.
Back in February, CCP executives told me that EVE Online saw $66 million in revenue last year. Chief Marketing Officer David Reid says the company is now gearing up for the launch of its next title, the first-person shooter DUST 514, which is currently in beta testing and is supposedly on-track for a 2012 release on the Playstation 3.
With DUST, CCP is experimenting with a new model for console-based first-person shooters — the game will be free to play, with players instead paying for in-game goods. Perhaps even more impressive than the business model is the fact that the planet-based action of DUST will be integrated with the space setting of EVE Online, so that player activity in one game can affect the world of the other. The two games were kept separate for the initial player testing, but Reid says CCP is currently in the process of merging the two worlds, allowing players in both games to chat with each other and EVE players to cause some havoc in DUST through orbital strikes.
In part, the funding will be used to promote the DUST launch. Reid acknowledges that it’s going to be a crowded fall for video games, with a number of big releases like Halo 4 on the schedule. CCP doesn’t intend to “go head-to-head with EA and Activision,” but since the success of an online game doesn’t depend on driving a massive amount of first day sales, Reid says the company can take a more patient, long-term approach to its marketing campaign.
The launch is also coming after the disappointing performance of the highly anticipated MMORPG Star Wars: The Old Republic. Reid points to The Old Republic as a sign that “players by-and-large are consuming the content of triple-A games faster than anybody is able to develop them.” He contrasts that design- and story-heavy approach with CCP’s philosophy in EVE and DUST, where the universe is more of a “sandbox” and “the players become the content in the end.”
In addition to launching DUST, Reid says the funding will allow CCP to prepare for an IPO. The company doesn’t have any immediate plans to go public, but he says the money “allows us is to do some of the things you need to do for IPO preparedness,” such as building greater redundancy into its computer systems, so that it’s ready to go public when and if the time is right.
Big Data, a mega-trend that is showing no signs of slowing down, now has its own dedicated venture fund. “Data Collective” launches today, and is head up by storied investors, Zachary Bogue and Matt Ocko.
The fund’s cofounders plan to invest in about 40 early stage and seed startups in the IT infrastructure, Big Data, and analytics space, which they see as a several hundred billion dollar market opportunity. I caught up with them on the eve of the announcement to chat about the hype surrounding Big Data, their decision to go rogue with a new fund.
The partners told me they plan to take an active role in the day-to-day operations of their portfolio companies, more so than traditional venture firms. It will likely differentiate them from established VC firms from Accel Partners (who carved out a $100 million Big Data fund in 2011) to Andreessen Horowitz, who are also angling for a piece of the Big Data pie.
Both investors are still knee deep in the process of raising capital, and so would not yet disclose a figure.
The founders are confident they have right team for the challenge. Ocko has been an investor and adviser on the startup circuit for 30 years, with investments in Zynga, BranchOut and CrowdMob. Bogue, (pictured, above) an analytics expert, is an early investor in Square and cofounder of San Francisco-based office space for entrepreneurs, Founders Den.
The fund’s extended team is comprised of 35 “equity partners,” who will have a significant material share in the investments. The equity partners are all experienced technical types — data experts, CTOs and chief scientists — currently or formerly at tech giants like VMware and Facebook.
“They range from rising star female principal engineers of name brand companies who haven’t yet made a giant pile to grizzled veterans of two or three IPOs,” Ocko explained. ”What they all have in common is the opportunity to work collectively with each other and be part of a unified elite club.”
Jason Rosenberg, formerly a lead systems architect at Zynga, is one of the fund’s equity partners. He told me the managing directors have a rare “nitty-gritty of what a hacker, especially a data hacker, does every day.”
Gaining access to the partners’ network doesn’t hurt either. Rosenberg said that in 48 hours, Bogue was able to pull some strings to get him a meeting with Lieutenant Governor, Gavin Newsom. Bogue, a Bay Area-based investor and philanthropist, is currently expecting his first child with wife, Yahoo’s new CEO, Marissa Mayer.
By joining the Data Collective club, the startups will also gain a head start in the painful customer acquisition process. According to Ocko, this will help them scale quickly and “punch outside of their weight class.”
This may be Data Collective’s first micro-VC fund, but the team has been working quietly in “stealth mode” for several years. They have already made seed investments in promising, early-stage Big Data startups like Kaggle, Citus Data, and Continuuity.
“Don’t get me wrong. I may be wearing a nice jacket, but I still write code,” said Ocko, formerly a managing partner at Archimedes Ventures. “Zack and I have been at this for a long time and were evangelizing Big Data when no one knew what it meant.”
Ocko defines Big Data, a rapidly emerging tech segment, as “the set of technologies and practices for dealing with an exponential increase in the amount of data being accumulated, stored, and prepared for analysis from terabytes per month to potentially pedabytes per day.” It’s a mouthful, I know. In a nutshell, Ocko and Bogue are investing in startups that can make sense of extremely large volumes of messy data within the enterprise, and use it to derive new insights. In the right hands, data can be a highly valuable commodity.
The cofounders said they like to think of the space as layers of a wedding cake. The bottom layer is infrastructure (storage, cloud management, networking, and security), the middle layer is analytics, and the top layer is the application layer, which is closest to the end-user, the person who actually uses the product.
For Data Collective, the middle layer is the sweet spot. “We’re looking for startups that are doing analytics at scale, at speed, or better yet, both,” said Bogue.
The core team will also include two data experts: Bradford Cross, Prismatic’s technical cofounder; and Michael Driscoll, Metamarkets’ CEO, who will retain their existing full-time roles. Bogue and Ocko will not reveal the exact equity breakdown for the partners, but they stressed that the terms are simple and transparent. They did reveal, however, that the equity partners will not be offered seat on the company’s board.
Before wrapping up our interview, I asked the managing directors about the trend for young talent to build new geo-located, social mobile apps, and not enterprise technology. “I welcome them, the future customers of our companies,” joked Ocko. “It means more data for us to crunch.”
Writing solid content is only one piece of the puzzle when it comes to marketing a successful blog. It’s important to advantage of search engines by building link equity, flattening your blog, and using other SEO tactics to make sure your content is getting the attention it deserves. These seven SEO tips can play a major role in pushing your blog up the search engine totem pole, allowing you to rank higher and therefore garner more visitors to your site.
1. Make sure your pages link to each other so your link equity is spread out
If you have a blog article with 100 backlinks and another page with 3, the page with 3 backlinks is going to have a much harder time ranking on Google, unless those backlinks happen to be cnn.com, the New York Times and the Wall Street Journal. However, if your page with 100 backlinks links to the less popular page, it will share link equity, thereby helping it to rank better. Re-linking all your articles to one another can be a tedious process, but fortunately WordPress has plugins for automated internal linking, such as “SEO Auto Links & Related Posts”. Check it out.
2. Flatten your blog
How information is organized into categories, pages, and subpages on a website, and how they link to each other is called site architecture or information architecture. Site architecture tends to fall into two modes: flat site architecture and deep site architecture. Deep sites tend to waste link equity, partly because the search engines see the higher level pages as more important.
The graphic below demonstrates a deep site, with four layers. Google is going to assume the category pages are the most important, because from the home page, Google’s webcrawlers will encounter the category pages first. If the majority of your content is 3 or more clicks away from your home page, the search engines will see these “lower” pages as less important, and may not even index them. The flatter your site structure is, the better its opportunity to rank well, and it will insure your pages remain in the search engine’s index to be found by searchers.
3. Nofollow links to sites with which you don’t want/need to share link equity
Large sites like Wikipedia don’t really get much of a search engine ranking boost when you link to them, so you may as well save your precious link equity by using a nofollow link, which tells the search engines not to follow the link (and therefore not to transfer any of your link equity to that page). Making a link nofollow is easy: you just add rel=”nofollow” inside that link’s HTML code, like this: <a href=”http://address.com” rel=”nofollow”>My Site</a>. If you’re using WordPress and would rather not deal with the code, check out the “Nofollow Link” plugin by Alex Jose, which makes the process a single button click.
4. Noindex pages that must be on your site, but do not need to rank
5. Delete old articles that don’t rank
If you have articles that are more than two years old, are seldom read, and have little link equity, delete them, unless you have some sort of sentimental attachment to them. In that case, noindex them so they don’t dilute the link equity of other, stronger articles.
6. Put your most valuable keyword as the beginning of your post title
The title tag is the most important on-page element to keyword optimize, so your post has the best chance of ranking for a given keyword if that keyword appears at the beginning of the title tag (often the post headline). Also make sure other posts linking to this post use this keyword as their link text (what SEOs call “anchor text”).
7. Kill your reciprocal links
Reciprocal links have zero net SEO value, because they return exactly as much link equity as they receive. If you have any, delete them unless they are there for goodwill’s sake. You could nofollow them, but then you’d be tricking the person you made the reciprocal link agreement with (which most people would agree is a “gray hat” move). Some of the best quality links you can get are run-of-site links like blogroll links (as long as the sites are relevant to your blog), so get those if you can.
For more information about setting up your site architecture, check out my article Plan Your Site So It Ranks Online [Marketing Consulting Series] at Digital Marketing Blog.
How many of these tactics are you using on your blog? (note from Jay: we’re doing 1, 2, 6 at Convince & Convert. We’re working on 5, and should tackle the rest, too).
About the Tony Ahn:
Tony Ahn is Chief Digital Architect at Tony Ahn & Co., a hybrid marketing agency in Manila, Philippines that practices both traditional PR and digital marketing. Clients include Fortune 500 companies and major local corporations.
Tony Ahn is Chief Digital Architect at Tony Ahn & Co., a hybrid marketing agency in Manila, Philippines that practices both traditional PR and digital marketing. Clients include Fortune 500 companies and major local corporations.
Our research over the past twelve years has shown that brands whose values align with their customers’ values have much stronger brand equity as measured by brand preference, loyalty and emotional connection. I recently read Jim Stengel’s book, Grow: How Ideals Power Growth and Profit at the World’s Greatest Companies. He has come to a similar conclusion after researching 50,000 brands in conjunction with Millward Brown Optimor.
So here is what we have found. Brands that have achieved an uncommon level of success:
- Know who their advocates are and what motivates them. That is, they have deep insight into their most passionate customers.
- Stand for something important to these customers.
- Embrace values that are important to their customers. That is, they and their customers share a common set of values.
- Hire, manage and empower employees based on these values.
- Consistently live these values each and every day.
- Serve as self-expressive vehicles for their customers. That is, the brands become “badges” of customer attitudes, interests and values.
- Strive to create an outstanding customer experience.
- Care about aesthetics.
- Co-create their offerings with customers.
Consider these brands as examples of this:
- Fox News
- National Public Radio
- Seventh Generation
- Stonyfield Farm
- Southwest Airlines
- Trader Joes
Here is the irony – if your brand’s decisions are driven primarily by customer values alignment rather than financial considerations, it will achieve well above average financial results. A balanced scorecard is a must. Most purchase decisions are emotion-based and people often choose and feel best about brands whose values align with their values.
Sponsored By: The Brand Positioning Workshop
Best Buy founder Richard Schulze wants to take the electronics retail store chain private, according to a letter sent to shareholders today.
Best Buy has experienced some turbulence in terms of profitability over the last year, citing heavy competition with online retailers as one of the biggest factors for this. Talk of taking the company private first started back in June, as VentureBeat previously reported.
Schulze, who stepped down as Best Buy’s chairman earlier in the year, currently owns 20 percent of Best Buy stock and is offering others $24 to $26 per share to take the company private. The offer is about 34 percent higher than the stock’s closing price of $17.64 on Friday. The offer would also value the company at $8.5 billion.
Schulze intends to contribute $1 billion in equity from his shares, with the remaining amount coming from private-equity firms with an interest in acquiring Best Buy, reports Bloomberg. None of these equity firms, however, are mentioned in the letter.
“I have been actively exploring all available options for my ownership stake,” Schulze wrote in the letter to shareholders. “That exploration has reinforced my belief that bold and extensive changes are needed for Best Buy to return to market leadership and has led me to the conclusion that the company’s best chance for renewed success will be to implement these changes under a different ownership structure.”
It’s unknown at this point if the board will allow Schulze the opportunity to conduct due diligence and form a bidding group. We’re reaching out to Best Buy for further comment and will update the post with any new information.
Do you think taking Best Buy private will help return the electronics store giant to its former glory? Let us know in the comment section.
Editor’s note: Jason Best and Sherwood Neiss spearheaded the efforts to legalize crowdfunding and helped author the JOBS Act. They founded Crowdfund Capital Advisors and are currently co-authoring Crowdfund Investing for Dummies.
The concept of crowdfunding to launch and grow your business may seem like a dream come true—reduced cost of capital, access to new pools of investors, the community opening their arms and wallets— all giving your business a shot to make it big. While crowdfunding (both donation and equity based) offers amazing opportunities, it also brings fiduciary responsibilities, commitments of time, reporting requirements and the potential to let down the people who mean most to you in the world if the unforeseen happens and failure occurs.
As the authors of the Startup Exemption Framework that made debt- and equity- based crowdfund investing legal, we take the responsibility of educating entrepreneurs and investors extremely seriously. Anyone that has been in the private equity or entrepreneurial community long enough knows how hard it is to raise capital, whether that is from your professional investors or from friends and family. We want to ensure that people crowdfund responsibly—which is why we will be contributing updates, data and advice to TechCrunch readers in the coming months.
- Don’t Force People to Drink your Kool-Aid
Whether you are launching a donation-based campaign on Kickstarter for a new gismo or are preparing your online and offline networks for your new software company’s equity campaign launch—DON’T BE ‘THAT GUY.’ We have all heard him –the one that talks endlessly about his company and dreams and takes it personally if people don’t kick in to meet his Kickstarter goal. Business opportunities come and go, and if you push people too hard for dollars, you may see more people go in your life. While you have to get your networks ready, do so tactfully and legally. If people are not interested don’t keep pushing, as you never know their reasons for not kicking in. A better approach is to engage with your network before asking for money—see if they would be willing to evaluate your business plan or critic your pitch idea. Engage them, have them mentor you—people want to feel like they are helping and giving back. Also by asking people for their advice and help before asking them for money, you are also ensuring that you will overcome their personal objections when it does come time to ask for funding.
- The Impact of Failure on Those Close to You
Above all we advise entrepreneurs to never allow people to invest more than they would be comfortable losing. While no one ever wants to believe their idea could fail the reality is that, according to the SBA, 50 % of business fail within the first five years. While we believe crowdfunding will reduce those rates—as the SBA attributes 65% of all failures to a lack of capital. If failure does occur, you are going to need your friends and family to support you. While there are provisions that limit the amount of funds an unaccredited investor with a net worth under $100,000 can invest to $2,000 per year (or 5% of their annual income or net worth, whichever is greater), do you really want your uncle putting himself in a bind to fund your business?
- Plan Ahead to Avoid Investor Dread
Could you imagine adding an extra 10 hours a week of email management to your schedule? For crowdfunded companies that do not plan and execute properly, this can become their new reality. As novice investors can often require additional calls and emails, investor relations can quickly become distracting and overwhelming. Before you know it, your business could suffer… leading to even more calls and emails.
When you use crowdfunding to fund your business, you need to plan for ongoing communication with your donors and investors and set their expectations early and often about how you will communicate with them. Think about how you can create scalable ways to communicate. Is it a quick email update? Does your crowdfunding platform have online IR services that you can use? What will your cadence of communication be? Are you planning on using a publicity firm to help you manage the communication? If so, you need them to provide a plan before you launch your campaign.
Create a private group using Google, Facebook and/or LinkedIn groups to communicate with members. Set expectations up front on when updates will be given and never miss a deadline. The main point is that you need to be prepared to give regular updates—continuing to set and meet expectations regarding communication.
- Don’t Sweep Dirt Under the Rug
Communicating openly is critical. While publicizing achievements, new product developments, media coverage and good news is a must. You will also want to share issues or problems that may negatively affect the company with your investors. It is always better to be the one breaking the bad news. Most investors understand that hiccups occur, deadlines get missed, and circumstances can require a pivot to new opportunities—the key is to openly communicate and maintain communication during the good times and bad.
- Be in the Know
While the JOBS Act laid out general guidelines, the specific regulations crowdfunding companies will have to follow are still being written. All the same fundamentals for starting a business remain unchanged for crowdfunders. Start now to prepare to ensure that you will be ready in 2013, when equity and debt based crowdfunding becomes legal. Many of these steps will need to be completed now in order to be compliant and fully prepared.
There are a great deal of resources online that can help, sites like the Crowdfund Regulatory Intermediary Advocates(CFIRA) and the Crowdfunding Professional Association (CfPA), offer updates and training as well as conferences that will prepare companies to succeed in crowdfunding and stay within the confines of the laws.
As an entrepreneur, you certainly have a clear vision for your business, but this vision needs to be communicated to others. Investors need to be confident in your ability to create measurable value, especially if you do not have an existing track record of successful startups already under your belt. Show them why your business is worth funding and be ready to listen, when they give you advice. By spending a bit of time in preparation and communicating clearly with your investors in scalable ways—you can harness the power of the crowd and not be overwhelmed by it.
Editor’s Note: Alexander Haislip is a marketing executive with cloud-based server automation startup ScaleXtreme and the author of Essentials of Venture Capital and The Modern Business Guide to Panel Discussions. Follow him on Twitter @ahaislip.
Praise be to Box, the cloud storage company that recently waggled $125 million from private investors to continue its growth trajectory, expand internationally and continue ratcheting up its valuation into the billion-dollar range.
There’s a lot to like in this story, starting with Box’s service. I pulled Box into our company and we use it religiously to version control internal documents. It’s awesome and Aaron Levie and his team deserve to get rich from their hard work.
And 15 years ago, you could have gotten rich from his work too. Levie would have brought his company to the public markets, seeking growth capital, and you could have invested and watched Box grow from a $600 million valuation last year to a $1.2 billion valuation today. Box would have been open to average investors, folks aiming to see capital appreciation in the public markets and a modest return on their small savings. The high tide of Silicon Valley could have raised even the smallest boats.
But today, Box remains private. When it does go public, it will no longer be in its high-growth phase. Chances are it will look a lot like the companies that have gone public in recent years, ballyhooed and heaped with expectations that have failed to produce.
The beneficiaries of Box’s remarkable growth aren’t you and me. We can’t save our money and invest it in good, growing companies with an expectation of capital gain. No, the beneficiaries are the venture capitalists, private equity investors and company insiders. The rich will use Box’s growth, and the growth of dozens of other similarly impressive private companies, to get richer and retail investors won’t have access to the investment.
The concentration of wealth into the hands of an ever shrinking few leads to a bifurcated society of have and have-nots that few of us want to see. And the avarice that underwrites this shift is bleeding Silicon Valley of its best talent and the type of people who made it such a remarkable and productive place.
AN ALARMING TREND
Consider how a similar situation played out for Facebook investors. The company had a $550 million valuation when Greylock Partners, Meritech and others invested $27.5 million in 2006. The company went on to be worth 100X that over the next six years. I wish I could have locked in a return like that in the public market!
Instead, Facebook did half a dozen large private investment rounds while it was in its high-growth phase, benefiting a slew of private investors such as Elevation Partners, Digital Sky Technologies (DST), Li Ka-Shing and TriplePoint Capital, among others. All the investors that came in before shares started trading on the secondary market have seen a capital gain.
Just to be clear, this isn’t an issue of over-pricing the stock, first day bumps, or the investment banks propping up price. It’s shameful that Facebook has lost more than three-quarters of a billion dollars worth of market capitalization each day since it went public. And it’s doubtful that money is coming back. There’s no perfect apples to Apple comparison, but Steve Jobs took his company from a $48 billion market capitalization in October 2005 to a $104 billion market cap in May 2007. All he had to do was create the iPhone.
But even today, after the stock has dropped and dropped, the private investment firms that bought into Facebook before it went public at the minimum doubled their money. (That of course excludes Goldman Sachs and its clients, which are likely regretting they had no financials to consider when they bought Facebook shares at a $50 billion valuation.) The simple fact is that venture capital and private equity investors captured Facebook’s era of explosive growth and left nothing for public investors.
You can say Facebook is an outlier, a once-in-a-decade aberration, but we’re seeing this kind of post-IPO performance more and more from tech companies. Quick, name a tech IPO that’s done well recently. Did you say LinkedIn? It’s been up 36% since its May 2011 IPO. That sounds pretty good, until you consider that for the three years before it went public it jumped 7X. The private investors that footed a massive investment round then captured the capital gain that could have been in your pocket.
Venture capitalists and private equity firms are killing the IPO. When they make large investments in fast-growing growing companies at more than $1 billion valuations, they’re effectively doing what the IPO market once did. And in so doing, they’re harvesting explosive growth that used to accrue to public market investors.
THE GOOD, THE BAD & THE INEQUITY
Companies today wait longer to go public. That could be construed as a positive thing. There are fewer garbage companies going out, fewer instances of Webvan or Pets.com. We should be glad for that, I suppose.
And maybe the ability to stay out of the public markets helps startups focus on long-term goals instead of short-term earnings. Operating in the public market imposes costs on a company including listing fees, legal fees and accounting audit fees. Moreover, there’s the threat of activist shareholder intervention, stock manipulation from hedge funds and the possibility of hostile takeover. There are lots of reasons executives choose to keep their companies private and take growth equity from investment firms instead of individuals. As Box’s Levie told TechCrunch: there are elements of the company’s strategy, like investing heavily in international growth and “deep technology”, that Box has “more latitude” to do as a private company.
But what’s good for the individual isn’t necessarily good for the ecosystem. We the people have decided that big companies are more responsible when they report to a broad base of shareholders, that they are more accountable when we can all scrutinize their financials and that our economy works better when major companies act as public entities. That’s why congress established the SEC, that’s why we require transparency, that’s why we support an ecosystem of service providers that create nothing save more efficient markets. It’s for the greater good.
I’m certain the people who bought Facebook shares on the secondary markets when it was still private are starting to appreciate the value of transparency and financial disclosure.
But there’s a more pernicious product of the shift away from public market IPOs to massive pre-public rounds. It’s that late-stage venture capitalists and private equity investors will take 20% of the valuation increase that Box experiences between now and the time it eventually goes public in carried interest. The partnerships, run by people who already make an average of between $750,000 to $1 million each year already, will collect a huge payout.
I’m not talking about skilled venture capitalists who handhold naïve entrepreneurs and facilitate the creation of great companies. I’m talking about leaches that offer little beyond an extended cash runway.
To be sure, university endowments, public pension funds and other large pools of capital benefit too and many small investors have exposure to the value created in Silicon Valley through these intermediaries. But they too would benefit better from promising and proven startups entering the public market. After all, venture capitalists and private equity investors might well be the world’s most expensive money managers.
We’re witnessing a technology boom in Silicon Valley, where real companies are creating valuable products. They’re also creating wealth. There was a time when that wealth would be spread around, accessible to anyone with savings and a stockbroker. But now massive pre-public investment rounds are taking that wealth out of the reach of regular investors and putting it into the pockets of a select few.
AT&T has just acquired NextWave Wireless for the purpose of reworking its WCS spectrum for the build-out of AT&T’s 4G LTE network. According to the release, “AT&T will acquire all the equity of NextWave for approximately $25 million plus a contingent payment of up to approximately $25 million and, through a separate agreement with NextWave’s debtholders, all of the company’s outstanding debt will be acquired by AT&T or retired by NextWave, for a total of $600 million in cash.”
NextWave currently holds licenses in WCS and AWS bands, and for a long while, WCS could not be used for mobile internet. Sanctioned in 1997, rules were put in place to prevent this so that there would be no interference to satellite radio users in close spectrum bands.
But in June of this year, AT&T and Sirius XM filed a proposal with the FCC to protect the spectrum being used by satellite radio listeners from any interference. The proposal is still under review, but if it passes, it will offer up extra spectrum capacity for AT&T to continue its network evolution.
But it’ll be a while. According to the release, AT&T won’t be able to begin initial deployment of WCS spectrum for its 4G LTE network for another three years.
The deal hasn’t officially closed, and like the WCS proposal, is still under review by the FCC. AT&T anticipates that the acquisition will close before year’s end.
PeoplesVC, an online crowd-funding platform, announced it will bring grown up experience to the table in the form of new hire, Michael D. London. London will join the company as a boardmember and principal shareholder, and will assume the role of its chief executive.
The startup allows unaccredited investors to fund up to $1 million in startups and existing businesses. Unlike Kickstarter’s donation-based model, individual investors take an equity stake. The company was founded in May, and claims to be the first of its kind.
However, sites like Fundable and CircleUp have a similar M.O. to take advantage of new legislation passed through the U.S. JOBS Act, enabling companies to sell stock directly to the public. When PeoplesVC launched, it moved out of beta so small businesses could get listed on the site while the SEC finalizes its guidelines.
Crowd-funding is an exploding trend, but has received its share of criticism. Investors need to be carefully screened to avoid incidences of fraud and mismanagement. The opportunity is still relatively small. Felix Salmon at Reuters published this notable take down of the inflated statistics for the crowd-funding market, and estimated that pie was only about $165 million in 2011.
The founders hope this will bring legitimacy to the space, which is still considered high risk. “There are a lot of question marks around crowdfunding,” said PeoplesVC founder, Akhil Garland, in an interview with VentureBeat.
London said he is mindful of the risks, but views this is an opportunity to “kickstart” the entrepreneurial economy.
“The industry is going to attract mostly smart, honest, ethical people looking to build long term viable businesses backed by some of the best VC firms in the world who have not the slightest interest in making a “fast buck”, said London he a statement. He has raised $300 million in debt and equity for previous companies, including HQ-Headquarters Companies and Fort Lauderdale-based, The Memories Company.
The New Hampshire-based operation also announced it will be relocating to the nation’s tech capital, San Francisco.
Filed under: VentureBeat