when you do your start-up and you are focussed on building value you more than likely will need investment from outside sources. you must always keep in mind that such investors are investing in your company so that they will get an enhanced return at some stage in the future. this is achieved either through an IPO (very rare these days ) or through being acquired.
in this post i have put together some of the latest thinking from the valley, gleaned from http://www.vator.tv/
http://bit.ly/aSZ9FZ ( go to original web sites for the videos) Net giants predicted to go on buying spree
Google, Microsoft, Apple, Amazon, eBay, Yahoo have north of $50 billion in cash
With the recession behind us, the big, deep-pocketed Internet giants are expected to be actively snapping up companies this year. Indeed, Google already kicked off the year in a buying mood with its $50 million acquisition of social Q&A site, Aardvark.
"A year ago they stopped all acquisitions," said Mark Mahaney, Internet analyst at Citi Investment Research, referring to the publicly-traded Internet companies, Google, Yahoo, eBay and Amazon. "Now that we're out of the recession.. and now that they're looking for new growth opportunities, you bet there's going to be a pick-up in M&A activity, and those are the four obvious."
Mark points out that Google has $14 bln to $15 billion in cash, eBay has $5 billion, Amazon has $2 bln to $3 bln and Yahoo has $3 bln to $4 billion. Add in Microsoft and Apple's stockpile and there's north of $50 billion in cash looking for secular growth opportunities.
Already we've seen some major acquisitions happening in the last several months, a good indicator of activity in the new year. Amazon's acquisition of Zappos closed in November 2009. (Note: Watch for my interview with Zappos Alfred Lin - coming soon). Google bought AdMob for $750 million in stock in November, and was reportedly interested in buying Yelp, in mid-December. Apple bought Quattro Wireless for $275 million in January.
Mark predicts we'll see more consolidation in these areas - smart phone, ecommerce, mobile advertising and local.
http://bit.ly/94oVmR What the Apple-Google War means for startups
Tim Chang, Norwest Venture Partner’s mobile guru, says the giants are hungry for cloud technology.
If you’re a mobile entrepreneur and haven’t yet met Tim Chang, you’re not going to enough conferences. Ever since his firm, Norwest Venture Partners, raised a whopping $1.2 billion fund last year, Chang has been active on the speaking circuit (he even sported a bass guitar on the bandstand at Vator Splash this month). Chang focuses on mobile, gaming, and digital media investments for Norwest and leads NVP's investment practice in China and Asia-Pacific. He previously spent 5 years living in Japan where the gaming and mobile markets are lightyears ahead of the U.S. in many respects. All of that means Chang knows his stuff when it comes to the future of mobile. I got him on the phone on January 25 (ie, before the iPad launch) to talk about Apple’s newfound appetite for startups (Quattro Wireless and Lala being the most notable acquisitions in recent months), and how the Apple-Android wars are affecting his investment strategy. Chang says that Apple, Google, handset makers and carriers are all hungry for cloud technology that is not currently in their DNA, including ad networks, geolocation and social graph analytics. His insights on how much Google will actually be able to penetrate the Chinese mobile market are also worth a read…MB: It seems Apple is becoming more acquisitive. What kind of companies do you think they’ll go after? What’s their strategy?TC: I think it’s pretty clear we’re seeing two new giants go head-to-head: Apple and Google. The way I see it, we’re starting to see large companies engage in cloud warfare. Every company needs a piece of the cloud. There are several strategic assets within cloud warfare: there’s the address book, the public relations with the customer, there’s the digital locker in the sky.... There’s a variety of assets and it’s pretty clear all of these large companies will need to play in these spaces, whether it’s carriers—and you’re going to see carriers being acquisitive—whether it’s Google, which starts from more of the search and data side, or Apple that starts from the device side and realizes we are no longer in a age of just selling consumer electronics. That’s a pretty dead market. It’s all about what I call the device-as-a-service. IPhone is a device built for cloud connectivity out of the box. Kindle is the same. I think one of the clear messages from CES this year is that going forward, most devices will be architected for a device-as-a-service type of experience.The hardware was commoditized long long ago and while design is differentiating some new products, in general, it’s the connection to the platform—the app store, the cloud, all those kinds of services—that really makes the difference, so every hardware company needs to figure out how to be very good at being a cloud service and software company as well. That’s not normally in their DNA, so you can expect a lot of acquisitions. Apple is the first, but it’s not surprising that guys like Nokia a couple years ago acquired Navtec on the map side, and if Samsung, Motorola and all these other guys are smart, they’re going to be acquiring similar assets to become ready to be software-as-a-service companies just as much as they are hardware companies. MB: We’ve seen mobile ad neworks and a couple geo-location companies get bought up. Any other types you expect the corporate buyers to target?TC: I think social graph is a huge important part. I think companies that have data-mining, analytics, or own the social graph itself will be very important. Arguably, Facebook’s already locked up the social graph, so it’ll be hard to replicate that. However, any other startups that have been able to scrape that or get pieces of other social graphs from other companies will be very important. I think companies that scan and can analyze social graphs, scan news feeds and social feeds will be pretty important. You’ve already started to see some of this. Carriers are starting to some acquisitions of connected cloud address books types of things. You know, Apple tried the Mobile Me service that at first launch didn’t work so well, and in my opinion, Apple’s never really understood the social net well, so that can be an area that they bulk up in, just like they purchased advertising so they can have ad infrastructure going forward.MB: Does acquisition in the social graph space mean buying media companies like social networks?TC: Nah, probably not. My guess is it’s going to be more social graph analytics and data companies: companies that have metadata around the social graph. That’s probably more important than buying some would-be runner-up to Facebook or something.MB: Does the battle between Apple and Android affect how you invest in games, or does that not really matter?TC: I think it’ll be pretty important, because 2008-2009 was really the year of the app store taking off and then 2010 I think will be the year of Android really taking off, especially overseas. What’s really important is that companies that want to play in smartphone gaming 2.0 have to be ready for three things: the first is expansion beyond just the iPhone platforms, so prioritizing the Android platform and potentially also RIM and others. I think they’re de-prioritizing Microsoft and Palm right now. I think it’s clear, every developer needs iPhone, needs Android and maybe RIM—those have become the top three.Second, it’s going to be a global market; it’s not just the U.S. As Android spreads into China and other regions, companies should be looking at internationalizing.Third, these companies have to be ready for the shift to free-to-play with in-game microtransactions. Mobile smartphone gaming is going to mirror what’s happened with online social games like Zynga and Playdom. The natural pricepoint for most of these should be free. It should all go to free and be monetized through in-game transactions as well as potential upsell to premium, whether that’s subscription, or something else.MB: Google recently had a run-in with China. Will that hurt their ability to tap the mobile and gaming market there?TC: It’s interesting, China Mobile rolled out their Ophone platform, which was their answer to iPhone, and the whole thing’s built on Android. That said, Android is a weird variant because it’s built for customization. It’s meant to be tweaked and skinned however you want it, almost like an opne-source kind of thing, so I think you’re going to see the fragmentation of Android in 2010. Every carrier, every handset maker wants their own flavored custom version of Android. One of our portfolio companies called Borqs in China is the leader in this area—they’re almost the de facto Red Hat of Android now doing all these custom integrations for the system rollouts. You know, it’s interesting to see—after you customize to a certain point, is it still Google anymore, or is it a kind of successor to Linux Mobile as the true open-source framework. The Google question will be an interesting one. I think it could potentially hinder vanilla Android launches in China where Google is the default search, but I think we’ll continue to see customize Android rollouts, where they’re heavily reskinned and it doesn’t feel like generic Android.MB: In these reskinned offshoots of Android, how much access and monetization capability does Google have?TC: The Google Search experience and other Google apps are heavily integrated into Android, but carriers have the ability to replace big chunks of those things or pick preferred solutions or pieces and modules in their customized Android rollouts, so that’ll be an interesting battle to see. At some point some of the Chinese folks could say, you know, I don’t want Google Search to be the default search engine; I want something else. But the best hook for Google into China is search, not just online where Baidu is number one, but especially in mobile. Mobile’s always been a potential Trojan horse for Google to really win a lot of market share on search in China.
Can ngmoco become the Zynga of iPhone games? The two look surprisingly similar. Game maker ngmoco raises $25M, buys Freeverse
Technology trends and news by Matt BowmanFebruary 23, 2010 Comments (0) Short URL: http://vator.tv/n/dfa
Can ngmoco become the Zynga of iPhone games? $25 million says yes. That’s how much the company just raised in a round led by Institutional Venture Partners, with existing investors Kleiner Perkins, Norwest Venture Partners and Maples Investments also participating. Ngmoco is the creator of popular iPhone games like Eliminate, We Rule and Touch Pets.The company also announced the acquisition of rival iPhone game developer Freeverse, another leader in the space that produces Parachute Ninja, Top Gun, NBA Hotshots, and the ever-popular Skee-ball.CEO Neil Young (not the still-kickin’ 60s rocker) told TechCrunch he wants to “amass enough scale” to accelerate “away from the pack.” That approach—gobble competitors, grow like crazy on a new rapidly expanding platform (Facebook / App Store) all the while amassing a braintrust for making games addictive and profitable—sounds a lot like Zynga. In fact, ngmoco looks very similar to Zynga circa early 2009: two years old, $40 million in funding, one acquisition under its belt, and a steady stream of gaming hits. The companies also share IVP and Kleiner Perkins as investors.Zynga now has raised a total of $219 million, just made its third acquisition and is valued at around $3 billion by SharesPost. Since only true predictions are remembered, I’ll go ahead and bet that ngmoco will be the next wunderstartup of Silicon Valley.Last year, Young transitioned all of ngmoco’s games to a free-to-play model, hoping to monetize with in-app purchases. That's consistent with what Tim Chang, an investor in the company, told us last month: "These companies have to be ready for the shift to free-to-play with in-game microtransactions." All of Freeverse’s games are paid apps, and Young plans to switch them all to free-to-play. A bold move, for sure. Then again, that model has certainly worked well for Zynga, which, according to most speculators, generates hundreds of millions in revenues a year.
http://bit.ly/1mNWbO Tim Chang wants to fund the future of gaming
The up-and-coming Norwest Partner also predicts VC consolidation and the rise of super angels
In the not-too-distant future, Tim Chang sees a brave new world of online “gaming-as-a-service”: cloud-based, free-to-play, frictionless distribution, all monetized through advertising, virtual goods and premium subscriptions. And to help build it, he's looking to fund everything from a vertical gaming cloud to "Paypal 2.0" microtransaction processing, next-gen publishers, new platforms, service layers, and technology enablers.
I spoke with Chang last week outside the Norwest offices on University Ave in Palo Alto. Below are his thoughts on the coming consolidation in the VC world, why he thinks gaming is a bright spot on an otherwise cloudy horizon, and what the new online entertainment utopia will look like.
MB: The recession has hit the VC industry hard. People are saying either the VC model is broken or it’s going to re-emerge completely changed. What’s your take?
TC: Well, there is some truth to the fact that it may be broken today, but like all financial markets, they self-correct, so it’s not that VC as a category goes away, but it will evolve and it is right sizing, so it is true that we may have a smaller venture capital industry than what we’ve had in the last five years. While it doesn’t go away, you could say that at worst you could say that maybe half the funds will be in existence five years from now, and maybe it’ll be half the size of what it has been, and maybe that’s the right size for the market.
At the same time, you’ll see the venture model evolve. You’ll have a bifurcation of venture funds that are growing larger and larger and becoming global players on a multi-stage type of model, and you’ll also see smaller, more boutique, focused funds probably specializing in a sector, a region, a particular stage, maybe smaller outcomes. You will see for example the rise of the super angels, who have smaller funds but operate like very early-stage VC models focused on a particular sector or a particular size of investment.
MB: Let’s talk specifically about your sector of expertise, digital media. What’s happening in that industry right now?
TC: Digital media’s particularly interesting because there are two tectonic plate shifts that are happening. One is the traditional business model of advertising is under pressure due to the recession, and so a lot of people come to the conclusion that pure-play ad business models don’t work any more for content and destination type of plays. On the other hand, distribution has become exceedingly fragmented with the Internet, with mobile, with Web 2.0 social media, and so traditional outlets and how you publish to a mass audience are disappearing. For me it’s a very interesting time because both media and the advertising industry have to reinvent themselves.
One of the brightest spots of hope on the horizon is in the gaming and interactive online entertainment areas. It’s kind of funny—I joke that virtual goods is becoming the advertising of 2009. So whereas last year all the business plans I saw had business models that would say “We’re ads-based,” today it’s all “We’re virtual-goods-based!” You’ve seen a lot of Web 2.0 entrepreneurs shift to try to be social gaming or free-to-play online games. It is true we’re seeing gaming rise, and I think it’s because gaming can monetize in multiple ways beyond just advertising, so we’re seeing a lot of people flock towards gaming as a potential safe spot.
MB: The virtual goods model is based on micropayments—the notion that people are going to be willing to open there purse strings to put up just a few bucks. A few year’s ago, the “penny barrier” was seen as a huge obstacle—people just weren’t willing to pay for small online goods. Do you think the consumer mentality is changing?
TC: I think it is, and young people are being trained from Day One on new services like Club Penguin, which is still subscription-based, but subscription as an offshoot of these virtual currencies that they’re racking up by playing and engaging with the online world. So I think you’re going to have a lot of young users being educated on how to interact an pay with these virtual gods systems from games and websites early on and it’ll be a very natural fit for them to then move over to microtransactions for things like mobile payments, first for online digital goods and then eventually for retail goods in the physical world as well.
MB: So given this new playing field what kind of companies are you looking to invest in?
TC: Having grown up playing games since age 10 on Apple, gaming is a big passion area of mine personally, and I’m very happy that it’s become a robust investment area. That said, I don’t typically invest in pure game companies that are just studios. Instead, we’re looking for next-gen publishers, platforms, and also gaming technologies and enablers. What I mean by that is even gaming itself is shifting from packaged media to really gaming-as-a-service, and that’s really just a template for the shift of the media industry overall towards what I call media-as-a-service, or entertainment-as-a-service. It’s going cloud-based. It’s going free-to-play with frictionless distribution, monetized through advertisements, virtual goods and premium subscriptions. We’re looking at all the pieces that enable that. We’re going to see vertical cloud solutions just for the gaming cloud. We’re going to see next-gen, “PayPal 2.0” for microtransactions payment processing, We’re going to see a whole lot of new service layers around gaming as well, in addition to the equivalent of a publisher 2.0, on new platforms like social networks and iPhones.
MB: Last question: What makes Tim Chang want to get up in the morning?
TC: I’m very lucky that I get to invest in what I’m passionate about personally. I’ve always been about gadgets and games, and I’m a big guitarist so music and media have been close to my heart. Those are things I do naturally, and to be able to weave that into my day job is something I’m very grateful for. These are things that I think and dream and talk about all the time anyway—it’s not really work, it’s sort of play. Working at Norwest, being able to investigate these areas to invest in, to make money and also to back really smart entrepreneurs and thought leaders in this area is an incredible experience. I’m lucky to have that.
http://bit.ly/b2F6Ag How to get Norwest's Tim Chang to listen to your idea ($0.5m - $15m) vertical ad plays, analytics (tim led venture investment in PCH int’l Liam Casey http://www.nvp.com/ )
Advertising is the lazy entrepreneur’s answer to a poorly, thought-out business plan,” said Tim Chang, Principal at Norwest Venture Partners, in a recent interview with me. Gulp. If you’re an entrepreneur with an ad-supported model, and no traffic, and you’re thinking of getting Tim to be your champion, or much of Silicon Valley for that matter, think again. Advertising-based businesses require significant traffic, as Don Dodge, director of business development at Microsoft, made clear in his recent piece, “Does Web 2.0 = Bubble 2.0?” recently.
Indeed, despite the dominance of both MySpace, with 118 million users worldwide, and Facebook, these two sites are only estimated to generate about $1 billion in sales combined this year, according to eMarketer. In this environment, the best thing a startup can do is to think about non-advertising models. “I’m so relieved when an entrepreneur says, ‘Yeah, there’s some ads to this; but I want to sell stuff,'” said Tim. Such non-ad models include virtual good sales, subscriptions, lead generation and e-commerce. As for the type of companies Tim is looking for, they include vertical social media sites and vertical ad networks.
Norwest invests anywhere between $500,000 and $15 million to $20 million. What does a team have to look like to get that half a million? I asked. Tim said that he bets a lot on serial entrepreneurs who are tried and true, and more predictable. He’ll bet on new entrepreneurs if their idea is getting “grass-roots” traction.
Hollywood and Silicon Valley
Tim, who’s been spending a lot of time down in LA these days, also talked about how Hollywood talent agencies and Silicon Valley venture capitalists are starting to work with one another to fund celebrities that want to take ownership in their future. Since the writers’ strike, VCs have been receiving inbound calls from Hollywood agents and artists looking to leverage Facebook, YouTube and social media, said Tim. The challenge is that Hollywood and Silicon Valley still speak different languages, he said. In the Valley, VCs talk about equity and delayed gratification while Hollywood cares only about what’s in it for them today, he added. Which model will prevail? I asked.
Everyone is learning from each other, he said. “Silicon Valley entrepreneurs realize they need high-quality, expert and premium content to inject into the long tail,” Tim said. “Hollywood is learning to build a community around their content."
(Note: There's obviously more to this interview. But you'll have to watch to get all of Tim's insights.)
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