Flickr founder looks to strike lightning again
– Connie Loizos is a contributor to PE Hub, a Thomson Reuters publication. This article originally appeared here. –
Stewart Butterfield has it made. He’s famous for co-founding the popular photo-sharing service Flickr in 2004. He lives comfortably in Vancouver, having sold Flickr to Yahoo for a reported $35 million in 2005. And investors including Accel Partners and Andreessen Horowitz have thrown $17.2 million behind his two-year-old game company, Tiny Speck, even though the Flash-based multiplayer game it’s been developing, Glitch, hasn’t launched publicly yet.
So why does Butterfield confess to living in “perpetual fear” these days? The truth is Butterfield is under enormous pressure. Expectations for Glitch, which Butterfield describes as a “shared, perpetual game with its own ecology,” are exceedingly high, both because of Butterfield’s personal brand and its ephemeral launch date. (Even after two years of alpha and beta testing by roughly 20,000 gamers, Butterfield declines to disclose when he plans to release the game. “We haven’t finalized (the release date) yet, though the end of September is likely,” he says.)
More significantly, Glitch is hard to categorize. Butterfield credits Zynga — the online gaming company behind the Facebook hits — as “the best thing that could have happened to us, pre-launch. Now there is something like 150 million people who previously didn’t think they’d play a game online and now do.” But Glitch aims to deliver a much higher level of engagement than Cityville or Farmville, two of Zynga’s most popular titles on Facebook. Butterfield says that it’s hard to play Glitch satisfyingly for less than 15 minutes at a time, and that Glitch’s beta testers play an hour on average — with some playing for up to six hours at a time.
At times, what Butterfield seems to be describing is a massively multiplayer online game (MMO) that Facebook gamers can play. The game of Glitch — which involves traveling billions of years back in time in order to re-create the future, by creating and collecting resources, gaining skills, and completing quests in increasingly challenging environments – will invite users to customize their virtual homes or to buy clothing items for their avatars. (Subscribers will receive more customization options, and be able to purchase more a la carte.)
Butterfield will also allow “third party developers to use your avatar and have it show up on other games that people can play in different environments.” The idea is for Tiny Speck to act more or less like a publisher, where developers create games, and Tiny Speck strikes deals with them. Butterfield isn’t sure what those deals will look like yet, however.
What Glitch won’t do, he insists, is allow users to pay to advance in the game. According to Butterfield, “the perception is that it’s unfair, but also, because (games that invite users to spend to get ahead) basically present stop signs with dollar signs,” such games can quickly alienate users.
Silicon Valley recruiter on tech hiring frenzy: “Everyone’s desperate”
Robert Greene, the founder and CEO of Silicon Valley-based GreeneSearch Inc, specializes in recruiting hands-on talent for technology-focused companies, primarily startups. He provided his perspective on the current boom in technology hiring.
Q: How would you characterize the tech hiring market now? A: It’s very competitive right now. It’s been like that for a while; it’s probably heated up even more of late. You have the bigger companies – Groupon, Zynga, Google, LinkedIn, companies that have been proven and successful – and then you have all these startups. The supply doesn’t meet the demand.
Q: Is there an advantage to being a small company? A: The advantage they have over those (big) companies is that they can move really quickly. They’ll do everything in a day and make an offer and hope that person will accept right away before they get into the bigger companies. Those are their selling points. They have to move quickly, they have to be agile, have to have the compelling story, have to give equity, along with competitive salaries.
Q: Do you think we’re heading toward another tech bubble like we saw in 2000? A: I’ve been recruiting for seven years. I know back in the boom companies were offering cars and huge bonuses and stuff to attract engineers, and that’s not happening. I’m seeing real money – I’ve heard that Google is making huge counter offers, real money.
Q: How many offers are your top engineers getting? A: I had a guy out of Amazon in Seattle who had three offers. We’re seeing multiple offers. I had one instance where an offer was signed and Google countered and made him a huge offer back and he stayed at Google.
Q: Are you seeing companies looking less at top-tier schools? A: No, I’m not seeing them sacrifice the quality. Everyone’s desperate, trying to figure it out. I don’t know if there’s any simple solution other than move quickly, have a compelling story.
Q: How long do you think this boom will last? A: I hope it lasts for a while. Usually it goes in cycles. It’s been reported on more recently – but it’s been happening for a while. The news is on this now because of the LinkedIn IPO. Now there’s some real exits and big exits. We’re not going to have a time like we had in 2000 where companies didn’t have business plans or revenues and were going public. I’ve been hearing the B (bubble) word a lot – but I think it’s more realistic.
Exactly what are they looking for? More MBAs? Salesmen? Certainly not engineers.
As startups ponder the secondary market, more seem to make private info public
– Mark Boslet is a contributor for PE Hub, a Thomson Reuters publication. This article originally appeared here. –
The secondary markets for private company stock may seem like the Wild West, with unstructured valuations and less than ideal information disclosure.
Yet several securities laws apply to transactions now taking place, and the onus falls on companies to follow rules meant to level the playing field, including making some confidential information about their businesses public.
This was the key takeaway of a National Venture Capital Association webcast discussing the recent phenomenon of secondary market trading. The bottom line is this: startups interested in permitting their shares to trade on a platform such as Second Market or SharesPost need to take steps to protect themselves from potential lawsuits.
“I think companies are saying, ‘I do want some information out there so there won’t be disparities of information,’” said Francis Currie, a partner at the law firm of Davis Polk & Wardwell.
They realize a lot of the selling and buying involves insiders who have the information, Currie said on the webcast. And they fear a sharp fall in the stock price could lead uninformed outsiders who purchased shares to file a lawsuit.
According to Currie, the information most appropriate for disclosure includes a list of material risks facing a company’s business and recent financials, but not projections. The Securities and Exchange Commission hasn’t yet weighed in on the topic, but it’s examining issues associated with secondary market trading, particularly the 500-shareholder threshold that forces private companies to disclose financials and other data. So more clarity could come from the SEC over time.
There’s a bubble in talk about bubbles
– Joanna Glasner is a contributor to pe HUB, a Thomson Reuters publication. This post originally appeared here. The views expressed are her own. –
There may or may not be a bubble in Internet startup valuations. But one thing in which there is definitely a bubble is in talk by journalists, investors and anyone else looking to raise their online profile through constant punditry about bubbles.
A recent Google News keyword search for instances of “Internet” and “bubble” unearthed 960 links. Facebook, Twitter and Zynga are bubbles, said one. Is Yelp: the dot com bubble part deux? asked another. One more asked: Is Twitter the harbinger of the second bubble?
Pe HUB likes to talk about bubbles too. Connie Loizos drew a lot of commentary after publishing an interview in which Mark Cuban, who made his billions on Broadcast.com during the last bubble, compared the current cycle to something more like pyramid scheme. Greylock’s planned $1 billion new fund is the latest sign of an Internet bubble, wrote Mark Boslet.
It’s easy to dismiss some of the pontificating as merely symptomatic of a repetitive business news cycle in which journalists routinely hype a company early in its existence, then, when it gains traction and Wall Street favor, decry it as overvalued. But upon perusing some of the bubble-related pontifications, it became clear that much of the analysis goes beyond that formulaic approach.
Having experienced speculative manias and over-corrections to the downside in virtually every asset class over the past decade, it seems the question isn’t really whether something is over or under-valued. The question is, when is the right time to enter and exit a market characterized by cyclic speculation, paranoia, and irrationality masquerading as logic?
On this front, one of the more interesting bubble articles was published a little over a year ago by Henry Blodget, the former Wall Street analyst probably best known for putting a one year price target of $400 per share on Amazon.com at the height of the last dot-com mania. “After decades of increasing financial sophistication, weren’t we supposed to be done with these things? Weren’t we supposed to know better? By late 1998, I was cautioning clients that ‘what looks like a bubble probably is,’ but this didn’t save me. Fifteen months later, I missed the top and drove my clients right over the cliff,” he wrote. Blodget said he experienced the next bubble as a homeowner. There, he made the opposite mistake – selling his New York home too early, in 2003, and walking away from what would have been another few years of double-digit price increases.
It’s not a bubble, people; It’s a pyramid scheme
– Connie Loizos is a contributor for PE Hub, a Thomson Reuters publication. This article originally appeared on PE Hub. The views expressed are her own. –
Mark Cuban knows a thing or two about bubbles, having profited handsomely from an earlier Internet boom. But ask him if we’re seeing Bubble 2.0 and he’ll give you a different theory.
“It’s almost the 2011 version of a private equity chain letter,” said Cuban, who sold Broadcast.com to Yahoo in 1999 for $5.7 billion and went on to buy the the NBA’s Dallas Mavericks.
“Remember the old chain letter, where you put up some money, then you got other people to put up some money, and you gave it to the people who were in the deal before you? That’s what’s happening today,” said Cuban. “The early (VCs) are getting the new (VCs) to invest enough money at high enough valuations that they get most, if not all of their money back. Then the next round (sees) someone else invest more money at a higher valuation, returning cash to the last two rounds of investors. By the time you get to the last (VC) standing, those last few rounds hope they can get a return from the public markets. That may be very tough. But the only players really on the hook are the guys from the last rounds. Just like in a chain letter.”
It’s a valid point. As certain Internet company valuations reach astronomic new heights, it’s easy to conclude that Silicon Valley has spawned another giant bubble–one that will eventually bounce its way onto the public market and soak investors. But unlike the dot.com mania of a decade ago, today’s soaring valuations don’t involve hundreds of companies and thousands of retail investors. They center on a select group of wealthy VCs chasing after a comparatively small number of very richly valued tech companies–most of which are in Silicon Valley.
Over the last three months alone, Facebook’s roughly $33 billion valuation has roughly doubled, to an estimated $60 billion. Zynga’s reported valuation has jumped to upwards of $9 billion from $4 billion last May. And both pale in comparison to Twitter, which generated an estimated $150 million in revenue in 2010 yet has reportedly received overtures that peg its worth at between $8 billion and $10 billion. (Just two months ago, when Kleiner Perkins led a $200 million investment in Twitter, its valuation was $3.7 billion.)
Fueling the fire are firms like Andreessen Horowitz, which last week sunk $80 million into secondary shares of Twitter, and Kleiner Perkins, which this week threw $38 million at Facebook shareholders to (finally) add the company to its portfolio. But they’re certainly not alone. According to the secondary shares marketplace SecondMarket, VCs have represented the majority of SecondMarket’s buyers since the third quarter of 2010 and they accounted for more than 40 percent of its transactions in the fourth quarter.
People say that groupon is losing its value but i think goup on is flying high! http://grouponbot.com site is getting increasing greater no. of visitors day by day only because of their user friendly deals of all kinds especially for the discount hunters…and you can see people are cloning groupon type of sites …thats a fact but they can never provide services as good as groupon i bet on that!
TechCrunch founder gets last laugh
The saying “he who laughs last, laughs best” comes to mind in relation to a recent spat between TechCrunch founder Michael Arrington and Offerpal Media founder Anu Shukla over Arrington’s assertion that social gaming companies, like Zynga, are making hundreds of millions through “unethical” means.
Arrington’s original post on the issue, titled “Scamville: The social gaming ecosystem of hell”, details how social media sites like Facebook and MySpace are complicit in the scams, because “they’re getting such a huge cut of revenue back from these developers in advertising.”
Arrington followed this up by challenging Shukla at last week’s Virtual Goods Summit in San Francisco; claiming that direct-marketing companies like Offerpal act as middle men in facilitating these scams. Warning the following video has strong language:
It appears as though both sides have been busy doing damage control after the incendiary confrontation, with Offerpal posting a blog defending its position and following up by replacing Shukla as CEO with George Garrick, who formerly guided the successful IPO of advertising firm Flycast Communications, which was eventually sold for $2.3 billion. Garrick was quick to tackle the brewing controversy in his first Offerpal blog, titled “An open letter from Offerpal’s new CEO.”
In it Garrick states: “I’ve only got 48 hours under my belt, and have entered this industry in the midst of a recent firestorm of controversy… I am not going to comment on events leading up to this situation, nor on other players in the industry, but I have quickly concluded that regrettably, Offerpal has been guilty of distributing offers of questionable integrity from some of our many advertisers.”
For his part, Arrington has continued to press the attack, blogging about the showdown and Shukla’s subsequent demotion and soliciting reaction from MySpace and Facebook (“Facebook to increase enforcement of anti-scam rules”). He also posted on Zynga founder Mark Pincus who admitted he deliberately ran these direct-marketing scams in order to raise revenues quickly and show investors his small company was profitable right off the bat. Warning, the following video has strong language:
It’s obvious from your remarks that I’m nowhere near as smart as you guys. But I am smart enough to know that if someone offers me a job to work out of my home and earn 78.00 an hour, that it’s a scam. I agree with what you have all said about these companies having a responsibility to their customers. However, these scam victims also need to take responsibility for themselves. If it sounds too good to be true, that’s because it is.
from MediaFile:
Web 2.0: Ning does Virtual Gifts and Demand Media does healthcare
With the Web 2.0 conference about to kick off in San Francisco, Internet start-ups are unveiling new products and tossing out crumbs of data about their businesses intended to illustrate how fast they're growing.
Social-networking firm Ning led the charge on Tuesday with the news that it has grown 300 percent year-over-year to 36 million registered users and that it is jumping on the virtual goods bandwagon.
The company said it will begin selling virtual goods across the 1.6 million specialized social networks that exist on Ning for $1.50 per gift. The company said it will split 50 percent of the revenue with the Ning network creators who offer the goods on their respective networks.
Virtual goods are increasingly catching on as an attractive revenue stream for Internet companies.
Zynga, the hot videogame maker for social media services like Facebook, said it raised $427,000 from three weeks worth of virtual goods sales on its FarmVille game, according to the Silicon Alley Insider.
Still unknown is Zynga's annual revenue, which has been estimated to be between $100 million and $200 million in some media reports, but as SAI notes:
By telling us that some of its 59 million monthly FarmVille users spent $427,000 on just one product of the many available in just three weeks (annualized, the number is $7.4 million), Zynga is sending a very clear message: Yo! People really are spending lots of money in our games.
