Why the Newspapers are failing – it’s the value of the news stupid.

Back in the old days (before newspapers) there were lots of voices talking about lots of things. Very early newspapers left the back page empty for customers to write their comments on as they handed the newspaper to their friends. (People did the fact checking)

Fast forward a decade or two. The newspapers start consolidating information and journalism was born (i.e. Journalists checked the facts for you). Owning a newspaper was a great business.

Now fast forward to the present day. The Internet (and the search engines) have devalued the “news”. My fact checking is done online from hundreds of sources (also online).

There is “no scarcity of information” only the scarcity of time. When time is important be scarce, when time is not important be open.

The reason why newspapers are failing is that they continue to devalue the one asset they have – the scarcity of the information without a corresponding drop in the cost to deliver this information. The Internet changed the friction (think cost) in how information is delivered and fact checked – ergo the old business model no longer works.

Is GE going bankrupt?

Wow… is the CFO really telling us the truth, the whole truth and nothing but the truth… I very much doubt it.

Off the wires, no link.

"DJ reports GE Capital credit default swaps worsen even as GE released a statement emphasizing its strong cash position. The CDS are most recently quoted at 17.5 points up front, from 16.5 points up front earlier today, according to Phoenix Partners Group. That means investors must pay $1.75 mln up front, plus a $500,000 annual fee, to protect $10 mln of GECC senior bonds against default for five years."

That means the first year cost is $1.75 + $500k, or $2.25 million.

That's 22.5% first year cost to insure $10 million against default!

This means that the market is saying that the odds of GE going bankrupt within the next twelve months is greater than one in five, and that assumes zero recovery.

If the bonds would recover more than 80% in the event of a default then it is implying more than a 100% risk of default, which is obviously impossible.

This is occurring despite GE's CFO appearing this morning on CNBC making the case quite clearly that there is no risk of default under any materially possible scenario.  In other words, his assertion is that the odds of default are zero.

More GE (IMPORTANT) - The Market Ticker

Will Facebook ever be a going concern? (do the VC’s even care?)

I was reading the wires today and noticed that Facebook is going out for more funding – another $100m on top of the $400 already raised.

Let me get this right, 1/2 BILLION dollars for a startup that has NO earnings. Next they’ll be looking for TARP funding.

At some point a company has to have earnings, without that they can never stand on their own. And who out there wants to buy a business that never contributes to the bottom line?

Google did it once with You Tube (but that was to pay back Sequoia) and it will never make money with it. Notice how they never brought another company for that kind of money.

While we’re on the subject lets think about Twitter - $50m in funding and no business model. My advice would be to sell now – the window is only so big and if you take as much money as Facebook you may never get out.

Remember back to the old days – Google only took $20m in funding to get to profitability – Amazon took $8m and Electronic Arts took $2m. How things have changed – but one thing never changes, a company still needs “measureable, sustainable, profitable, revenue from volume”. 

Quote of the day

“Laws tell you what you can do. Values inspire in you what you should do. It’s a leader’s job to inspire in us those values.”

Sadly there is no leadership in America at the moment. Washington is asleep at the wheel and spend time arguing about things that have no value.

The VC walking dead

Interesting post on peHUB – link - Adeo Ressi blacklisted 44 venture capital firms on his entrepreneurs-review-VC site TheFunded.com. I can already think of a few more.

Welcome to the wonderful world wide web, where Google provides an all seeing eye for just about everyone. The playing field is changing faster than ever before. Entrepreneurs now have access to an incredible amount of information about who they should talk to regarding funding (and vice versa).

Suspicious reviews
Alsop Louie Partners
Bay Partners
Benchmark Capital
Clearstone Venture Partners
DFJ Mercury
Flybridge Capital partners
Greenhill SAVP
Kleiner, Perkins, Caufield & Byers
Matrix Partners
Milestone Venture Partners
Partech International
US Venture Partners
VantagePoint Venture Partners

Legal threat
EDF Ventures
GreenHills Ventures
IFC Ventures

Lack of new investments
Appian Venture Partners
ArrowPath Venture Capital
Blueprint Ventures
Centennial Ventures
CenterPoint Venture Partners
Concord Ventures
Crescendo Ventures
Crossbar Capital
Decima Ventures
Diamondhead Ventures
Eurofund LP
Hyperion Israel Venture Partners
InnoCal
Israel Seed Partners
Mercia Technology Seed Fund
Minor Ventures
NeoCarta Ventures
Oxford Bioscience Partners
Sequel Venture Partners
STAR Ventures
Tamar Technology Ventures
Vanguard Venture Partners
Veritas Venture Partners
Vesbridge Partners
Walden Israel
WaldenVC
WorldView Technology Partners
Youniversity Ventures

Since When Is 3x a Good VC Return?

If the very best VC’s are getting a 3x return over 5 years what are the rest of the VC’s getting? My guess is that it’s measured in percentage points.

The game has changed. Building intrinsic value is really hard, the trick is to do it without too many shares outstanding when (and if) you get to an exit point.

peHUB » Since When Is 3x a Good VC Return?

My old company - Secure64

Government Computer News awarded 14 technology companies with GCN Best of FOSE Awards for 2009.  The awards recognize outstanding and innovative information technology products for government exhibited this week during the 2009 FOSE expo in Washington.

Secure64 won in the Security Software category for DNS Signer which runs on the company’s SourceT operating system for the Itanium platform.  Be sure to check out this award wining product.

Recognition of Secure64’s excellence in the security marketplace isn’t new.  The company was a winner of the Itanium Solution Alliance’s 2007 Innovation Award.  Look for more innovative solutions on the Itanium platform in the Alliance’s 2009 Innovation Award Program.

 

The Itanium Solutions Blog » Secure64

5o9 Inc… betting on the inevitable

In The US, Mobile Internet Usage Is At Least One-Third And Maybe One-Half Of Wired Internet Usage

• link

The bottom line…

What that means for developers of web services is that you cannot ignore the mobile audience, it's big, its growing faster, and someday soon it will be as big or bigger than the wired internet audience. That means making sure your service works well in mobile browsers and is available via apps for iPhone and other phones that support mobile apps, like Blackberry, Nokia, Palm, Windows Mobile, etc.

How To Monetize a Social Network

“Little Joe never once gave it away
Everybody had to pay and pay”
                  — Lou Reed, Walk on the Wild Side

Nobody has yet figured out how to drive "Earnings" from these social networks. Their exit strategy is no longer M&A in this climate therefore if they can get to profitability then they could go public. Can they cut costs to drive to profitability from advertising? If not whose going to pay for these services?

How To Monetize a Social Network: MySpace and Facebook Should Follow TenCent « abovethecrowd.com

Is your company a “pencil?”

Do you focus like a laser beam on a single product for a clearly defined customer? Or do you have multiple focus points with one clearly defined customer and one not so clearly defined.

An example:

• Google is a pencil
• Yahoo tried to be a pencil and focused on search as well as media. One it does well, one not so well

Two great questions to ask your VC during the due diligence phase…

1. Has the fund made an investment in a company that was not already in the portfolio in 2009, and, if so, which company?
   
2. Has the fund completed a successful capital call in 2009?

If the answer is 'no' to either of these questions or the fund is uncomfortable discussing these matters, then don't bother pitching them and move on. Why? Both questions are designed to illicit the strength of the fund. Two “No’s” probably means there are some problems.

Twitter my location in real time

Adding real time location (via GPS) to twitter is relatively easy. Access the GPS api, read the data, auto add it to the twit along with some data and you’re good to go.

My question is this… what’s the value of having location inside the twit?

And a follow up question would be… how can you monetize this data?

Thoughts?

How low can it (the DOW) go?

Zero.

Until then it’s death by a thousand cuts until they stop issuing credit which people can write a credit default swap against and bet against it.

What a mess – trust and value are being destroyed at a dizzying rate.

The Lost Decade 1997 2007 – it’s a “Depression” stupid!

These two charts are simply stunning… we’ve been in a depression for 10 years and all we’ve done is put more lipstick on the pig.

This chart shows the S&P 500 adjusted for inflation with 1997 being the base year. The stock market booms of 2000 and a smaller boom in 2007 are clearly visible. At the end of the 10 year period the S&P adjusted for inflation is significantly lower.

 

 

 

 

 

 

 

 

 

Comparisons to The Great Depression - This period (Dec ’97 – Dec ’08) , from a stock market perspective, was worse than The Great Depression of 1929. Take a look at this slide from Michael Mandel of Business Week that compares 1997-2009 to 1927-1939.

 

 

 

 

 

 

 

 

 

You can read Michael Mandel’s blog and see his entire presentation at BusinessWeek.

Who Bears the Burden for a $3 Trillion Mistake?

I had to read this carefully three times. I believe he has it dialed. The common in these companies is already toast, what’s left? The Bond holders. They’re next in line at the barber shop. Talk about sticking it to the man – Ouch.

Mish's Global Economic Trend Analysis: Who Bears the Burden for a $3 Trillion Mistake?