Archive for the ‘investing’ Category

Some great advice from the venture capital world…

I spent the Thanksgiving holiday with my brothers in North Carolina.  I headed down a few days early so I could take a break from my most recent product launch and do some food shopping (I was the chef this year).

During my trip, I was able to meet some venture capitalists to talk about my future ambitions in the startup work.  I am in the process of changing my career direction, so I couldn’t wait to discuss my ideas with these individuals.

Here is some of the great advice I got:

  1. Begin at a startup, end as an investor – Since the venture capital world is very closed and selective, the best way to become a VC is to join a venture-backed startup, find some success (obviously, this is the hardest part), and do some investing yourself.  That way, you can bring real-world experience to a firm as a partner.
  2. Focus on a sector – It is difficult to be “all things to all people”, so you should find a niche and be the best you can at it.  Personally, I am not sure what my niche will be, but I have a few ideas…
  3. Product experience helps, but it isn’t necessary – Since I am by no means an engineer or a coder, this thought was particularly helpful for me.  For example, someone with operations or biz dev expertise can be just as valuable as a CTO.
  4. Revenue is king – I asked one VC which he prefers in a business he’s investing in… a great product with a large audience, but without a defined business model, or a smaller product with a strong revenue model.  The VC said he would invest in the latter.  I think I’d have to agree, but some other very smart investors I respect a great deal may disagree.

I can’t wait to act on some of this advice soon…

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Why Silicon Alley Insider is the king of creative valuation…

I’m going to take a moment and profess my love for the Silicon Alley Insider… it is not only an insightful place for news on digital business (not just product innovations, which TechCrunch tends to focus on), it has a smug humor than comes from its roots in NYC and Wall St. That style makes it different from other destinations for business news I’ve found.

One of my favorite themes from their reporting is “what we would do if we ran these companies”. Better than anyone else I have read, SAI have great opinions on how to extract the true value from the companies they cover. Some great examples include: Craigslist, Yahoo, CNET, and AOL.

But, my favorite post was on Wikipedia… SAI showed how Craig Newmark could earn around US$900M annually for the Wikipedia Foundation, if he ran Wikipedia as a competitive for-profit business, and donated the profits to charity (ala Newman’s Own).

Key lesson – Hidden value lies in almost every business… you just need to know where to look and how to find it. And, that’s why SAI is the king of creative valuation.

I’ve Never Seen a Deal Botched This Badly…

Check out this TechCrunch story regarding the End of Stage6. I thought the product was shut down because it was essentially a pirated movie web site… looks like I was wrong.

This is a fantastically well-written story by Michael Arrington on how to mismanage a business and cost investors a significant amount of value.

What’s also a shame is that the Divx Codec is a great product.

As prices dip, use your brain… not your gut

Here is an interesting point I read in the New York Times today about the psychology behind housing speculation:

“Rising prices encourage investors to expect more price increases, and their optimism feeds back into even more increases, again and again in a vicious circle. As the boom continues, there is less fear of borrowing heavily, or of lending heavily. In this situation, lower lending standards seem perfectly appropriate — and even a fair way to permit everyone to prosper.”

Earlier this year, I started investing in my company’s stock purchase plan. Since last November, the stock declined almost 40%. During this time, people were telling me to stop buying because my stock was losing value. However, I increased my contribution to the plan. Why did I do this? I have confidence that the stock will be back up. I am taking advantage of an under-valued asset.

After checking my portfolio yesterday, I am down about 5%. However, short-term returns mean little to me. In a couple of year, I think that I am going to be very happy with my investment.

That said, I somewhat understand a person’s gut reaction to selling as prices go down. People are worried that they will never be able to recoup their money unless they sell immediately. But IMHO, people need to maintain a long-term view in order to be successful investors… or at least to avoid a stroke before you turn 40.