Tag Archives: Silicon Valley

I Gotta Wear Shades!

My partner Tim, hammered me today on a recent post where I thought I had been sharing my optimistic view of the future, when in fact I apparently only underscored the notion that if this is optimism, who needs pessimism.

So, I thought that maybe I should look into the  Milken Institute‘s annual Global Conference, which was held this week in Los Angeles and was attended by many of the world’s most influential investors, economists, CEOs, innovators and policymakers, who met to discuss some of the most imminent and dire problems facing America and the world.

These same people were asked what makes them most optimistic about the America today. There was a predictably wide-range of responses, but it certainly was all positive.  

Here’s what they said:

Niall Ferguson

Professor, Harvard University

“The thing that makes me optimistic about the United States is technology and the ability of the United States still to be at the cutting edge. But of course that is quite geographically localized. That is a Silicon Valley story.”

T. Boone Pickens

Founder, BP Capital

 “It’s energy. I mean, today the United States has the cheapest energy in the world. We got the cheapest oil. We got the cheapest gas. And we got the cheapest gasoline.”

See? If it wasn’t for me, you wouldn’t know Mitch Daniels from Mitch Williams. 

Mitch Daniels

Governor, Indiana

 “The resilience of the American economy over time. We still give birth to more new businesses than other places [and] that we still have a core of innovation.”

Raghuram Rajan

Professor, University of Chicago

 “I think the strength of corporations [and] how much cleaning up they have done of their balance sheets, their work force and improving productivity is a hidden upside for the U.S. economy. If we can realize that over the years to come, I think there is substantial potential for growth.”

James Barth

Senior Finance Fellow, Milken Institute

 “I would agree (with Rajan) but I think that strength depends upon eliminating a lot of uncertainty. I think that’s the biggest barrier right now to the growth and after all it is an election year and one would expect a lot of uncertainty. There’s much more than there needs to be.”

Richard Fisher

Dallas Federal Reserve President

 “We are growing our population. We have an enormous Hispanic population that’s coming in. We are still the magnet for anybody that wants to work hard in the world. And we create, and we innovate, and we are masters of creative destruction. As long as government won’t interfere with that adjustment, and let the American genius go to work, we’ll win.”

Charles Murray

Author, Coming Apart: The State of White America

 The Tea Party to me is certainly as originally developed was this utterly spontaneous movement and all of my connections were that these were not racist, these were not Homophobes, all those social issues were off the table. They were talking about free enterprise, opportunity, liberty in very traditional ways. And that that much energy could be sparked with no direction just welled up is for me…wonderful. That’s my source of optimism.”

But, when they were asked if there are any future events that might impact their outlook, they all said  that the one caveat to their answer, was the hindrance of political dysfunction in Washington and its negative drag on prosperity in America.

What? You don’t feel good about Technology? You don’t live in magical Silicon Valley, where the wealth just trickles down like an endless river? You don’t love that cheap gas, which is on its way to a $4 national average? All those new businesses and that core of innovation got you down? You don’t believe in the strength of those corporations you love? Come on now, just look at how strong and powerful Goldman-Sachs has become. I mean we’re talking insane productivity and ridiculously clean balance sheets. How can you not love that?

And, the population growth? The Hispanic population doubles every year. Making babies, man. Creating and innovating. That’s where its at. What about letting that American Genius get back to work. That’s happening, right? All that energy sparked with no direction, welling up everywhere. And gosh, that Tea Party WAS a thing of beauty. And, no Homophobes. Can’t beat that with a stick.

OK. I’m just being silly now, because finally they did actually say, “There’s always that pesky Iranian problem and our probable backing of Israel’s inevitable bombing of that country, and the resulting spike in global oil prices, along with the coming European breakup and flight from the Eurozone, Germany’s probable rise to supremacy in the wake of the collapse, global warming and the probability of a double-dip recession here at home, which will exacerbate the current unemployment problem and drive civil unrest, and the unchecked corruption of Wall Street bankers and the Congress”.

But all in all, according to these brilliant thinkers, the future looks pretty bright.

 

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We Don’t Need No Education!

 

We don’t need no education

We don’t need no thought control

No dark sarcasm in the classroom

Teachers leave them kids alone

Hey! Teachers! Leave them kids alone!

All in all it’s just another brick in the wall.

All in all you’re just another brick in the wall.

I just watched 60 minutes. They did a couple of segments that were interesting, not so much in what was revealed, but rather in the apparent unintended irony of airing both segments on the same program.

We had on the one hand, a piece about Peter Thiel’s Fellowship Program, which awards $100,000 to applicants who compete for one of twenty such scholarships each year, in order to pursue their dream over a two year period. This often requires that applicants drop out of school to focus full time on their aspiration.

On the other hand, we saw a segment devoted to the world tour of one of my rock idols, Roger Waters, as he and his fellow musicians (not including any members of Pink Floyd) re-construct his monumental opus, The Wall, in a grand, operatic, concert-style production. This tour is essentially about performing a double album that was first recorded on vinyl 33 years ago. Roger is the lyricist, bass player, and creative force behind the legendary rock band Pink Floyd.

The Wall has its roots in Roger’s non-relationship with his biological father and describes the process by which he begins to build a mental wall between himself and the rest of the world, so that he can live in a constant, alienated equilibrium, free from life’s emotional troubles. Every incident that causes him pain is yet another brick in his ever-growing wall: a fatherless childhood, a domineering mother, an out-of-touch education system bent on producing compliant cogs in the societal wheel, a government that treats its citizens like chess pieces, the superficiality of stardom, an estranged marriage, even the very drugs he turns to in order to find release.

The wonderful hook between this story and Peter Thiel’s Fellowship Program is the reality of an out-of-touch education system bent on producing compliant cogs in the societal wheel, even in that pre-historic era of 1979.

Morley Safer’s generally combative and disrespectful interview of Thiel, promotes the idea that Thiel is quirky, cavalier and out of touch with reality. His plan is characterized as paying college students to develop their promising concepts instead of attending to school. And, of course Morley misses the whole connection between The Wall and a Fellowship Program that is designed to put an end to educational snobbery, enormous wastes of money and time, with nothing to show for it at the end. Now, I have nothing against old guys or the wisdom of age, but whose boat would you hitch a ride in, Safer’s or Thiel’s? 

Thiel’s critics include Vivek Wadhwa, a self-important, and successful bureaucrat-entrepreneur* turned professor who teaches at Duke and Stanford, who told Safer, “Peter Thiel has made so much money that he is out of touch with the real world. He doesn’t understand how important education is for the masses.”

“What I worry about is a message that’s getting out there to America that it’s okay to drop out of school, that you don’t have to get college. Absolutely dead wrong.”

What I think this says about Vivek Wadhwa, is that he is more worried about his career as a college professor, than he is about young entrepreneurs’ ability to follow their dreams.

Every college student interviewed for the program said essentially the same thing, “Yes, we are being challenged at school, but not in ways we want to be.”

Thiel is best known as a co-founder of PayPal. He is also the Silicon Valley investor and entrepreneur who made early stage investments in companies such as Facebook, LinkedIn, and Yelp. Now he’s investing in college students, awarding fellowships of $100,000 each to youth under 20 years old, essentially encouraging them to drop out of college to become entrepreneurs. See >>> http://thielfoundation.org/index.php?option=com_content&id=22

In tonight’s interview, Thiel tells Safer that his program is a viable alternative to what he sees as a largely ineffective university system where costs far outweigh benefits. It’s not for everybody, but if a young person is excited about creating something, she should have an avenue to go and do that.

“We have a bubble in education, like we had a bubble in housing…everybody believed you had to have a house, they’d pay whatever it took,” says Thiel. “Today, everybody believes that we need to go to college, and people will pay — whatever it takes.”

While he acknowledges that college degrees are necessary for those careers requiring a formal credential, like doctors, lawyers, accountants, etc., he also notes that a college degree is not necessary to land a high-paying job. “There are all sorts of vocational careers that pay extremely well today, so the average plumber makes as much as the average doctor,” Thiel tells Safer. I think some guy named Obama just said the same thing.

And, to his critics who say that most of his fellows will fail, Thiel says, “Sure. That’s possible. But, they will be so much better off having gone through the experience, and better prepared for the next one. In any case, they can also return to college if they find that the entrepreneurial life isn’t what they thought or hoped it would be.” (Roughly what I think he said)

This of course, reminds me of Sal Khan, who I wrote about in an earlier blog, who believes he can transform education worldwide, and his approach is now being tested in American schools. Along the way, the former hedge fund analyst has won the support of Google Chairman Eric Schmidt and Microsoft co-founder Bill Gates, who calls Khan “a teacher of the world.” He has revolutionized classroom teaching in Los Altos and Palo Alto, California. See https://isellerfinance.wordpress.com/2012/03/12/dont-all-fifth-graders-know-calculus/

What is heartening to me is that these little steps forward have the support of many of the giants in my industry, and almost every day, I run across an event or story that suggests we are moving to the Startup University state faster than I would have ever hoped or imagined. And, that is a really great thing.

I watch the ripples change their size

But never leave the stream

Of warm impermanence and

So the days float through my eyes

But still the days seem the same

And these children that you spit on

As they try to change their worlds

Are immune to your consultations

They’re quite aware of what they’re going through

 

Ch-ch-ch-ch-Changes

(Turn and face the strange)

Ch-ch-Changes

Don’t tell them to grow up and out of it

Ch-ch-ch-ch-Changes

(Turn and face the strange)

Ch-ch-Changes

Where’s your shame

You’ve left us up to our necks in it

Time may change me

But you can’t trace time

*Bureaucrat-entrepreneur: one who used the corporate capital of his employer on an internal project that was successful enough for its own application, that external applications were discovered in similar businesses and presented a commercial opportunity. Very different from, and not to be confused with a startup. In Wadhwa’s case, he began his career at the New York–based investment banking powerhouse, CS First Boston (CSFB), where he was Vice President of Information Services.  There he spearheaded the development of technology for creating computer-aided software-writing systems that was so successful that CSFB decided to spin off that business unit into its own company, Seer Technologies.  As its Executive Vice President and Chief Technology Officer, Wadhwa helped grow that fully funded startup into a $118 million publicly traded company, and leveraged that success to his current teaching roles at Duke and Stanford. Thiel or Wadhwa? You decide.


Stimulus Money Goes To Ground.

Under the banner of saving jobs, kick-starting the economy and keeping small businesses and organizations afloat through tough economic times, the US government has handed out more than $840 Billion in federal stimulus money since 2009. Of that, more than $33 Billion went to California.

Some of the largest and most recognized companies in Silicon Valleynearly all of which are flush with cash—were awarded $94 million as either prime recipients or sub-recipients.

Google got $686,681 as a sub-recipient on a contract to reach 14 additional different language audiences for the 2010 Census Integrated Communications Campaign. HUH?

McAfee was awarded $1,579,271 as a sub-recipient on five different contracts from 2009 through the first quarter of 2012. For ???

eBay received more than $4,447,000 on three different grants including a $2.5 million grant to the Office of the Governor of Arizona for the Government Services Fund. For the WHAT?

Applied Materials took over $10 Million to develop and demonstrate an advanced epitaxial growth system for high-brightness LED manufacturers. Somehow, this doesn’t sound like it is going to save jobs, lives or cure cancer.

Scott Amey, General Counsel at POGO, is critical of some of the outcomes of the stimulus bill.

“There are a lot of large contractors that received stimulus money, and it makes you scratch your head and wonder, ‘Were they really in need of receiving that money?’” Amey said. “A lot of people would say no.”

He went on to say, “When it comes to competition in federal contract, you always have a fear that the usual suspects, that the larger contractors, are always going to get the bigger piece of the pie. And then you have the small and mid-sized businesses that are fighting for the scraps.”

Yahoo! got almost $10 Million to build a clean-energy data center in upstate New York. According to federal data, the project created all of 25 jobs. Why can’t Yahoo! build its own data center?

Yeah sure. These guys really need all the stimulus help they can get. Are you kidding me?

Of all the recipients, more than half didn’t create any more than four jobs with the funds.

One of the biggest jokes was PG&E who received  $47,387,955. Twenty-five million dollars of that goes to design and test an underground compressed energy storage system. On our tax dollars? Come On, Man.

Why can’t a huge utility company do these things on their own?  PG&E made $332 Million in NET PROFIT even after absorbing the $550 Million costs of the pipeline explosions in 2010. “That is the whole purpose of the stimulus money.” A PG&E spokesman said, “to encourage innovation and testing new technologies.”

Sam Rosen-Amy, fiscal policy analyst for OMB Watch in the nation’s capital, said there was a tension between getting the stimulus cash “out as fast as possible to people who need it most,” and ensuring the money is being spent in “an effective and responsible way.” And, he admits that some of the smaller companies that should have received money did not.

Among these were two local applications for stimulus dollars that were denied back in 2009. Linda Crowe applied for stimulus funding, twice, so her organization Califa, which represents public libraries, could buy laptops and provide training for unemployed residents.

“It was all connected toward job assistance and for helping people find work,” she said.

“How much did you get?” Stock asked Crowe.

“Nothing,” she said.

Debarag Banerjee and his three business partners at WiViu Technology applied for $1.5 million to hire 13 people and build a video conference system to serve rural hospitals.

“If we got stimulus, funding had come at the right time,” Banerjee said, “we would have been in a much, much different state.”

Banerjee’s company has downsized significantly, and now it’s essentially out of business.

All of the other Silicon Valley companies who received funds wouldn’t agree to an interview with reporters about their stimulus projects or why their corporations needed the money.

If we simply gave the money to Kickstarter, and let them fund projects through the next few years with that $33 Billion, we would create tons of jobs and a lot of wealth. As one simple example, Pebble Watch Co., which just closed its Kickstarter round after raising $7 Million in three weeks has already created 6 new jobs and expects to create another 15 by year-end and they haven’t even begun to manufacture the watches yet. And, when you think about how this all works, it isn’t just the jobs created directly, its the indirect jobs that really count. Microsoft used to create 6 service jobs for every one new hire.

I don’t know whether Banerjee’s video conferencing system to serve rural hospitals makes any sense, but it only would have cost $1.5 Million to find out. That’s a rounding error on $33 Billion.  Or, how about a few bucks for laptops and training for the unemployed?

Instead we have PG&E throwing almost $50 Million into the ground for compressed energy? Really?


10 Tips For Entrepreneurs.

Major magazines and bloggers are always interviewing successful startup CEOs about how they did it, and what advice they have to offer young entrepreneurs who are just starting out.

Just starting out to do what, I wonder. If they are just starting out to build a company from scratch, the successful startup CEO is usually full of tales about following your dream, doing what you love, 80 hour work weeks, living on pizza and diet coke, constantly begging for money, going without salary for months, squeezing friends for sweat equity participation and trying and failing a hundred times to get his vision off the launch pad.

Sounds like so much fun that I am amazed that not everyone in Grad school is licking their chops for an opportunity to do it as well. Though, given the economy and the rapid development and adoption of social network technologies, there are more and more students and young professionals taking the startup leap every day. Deal flow in Silicon Valley has not been bigger since the early days of the dotcom bubble in the late 1990’s and 2000.

So, for the hordes who are taking that leap, what are the best tips that will guide them and be useful to their experience in trying to bring a new company to life? I am asked this question a lot. Having started several companies and taken 3 of them to successful exits, while the 4th is still a work in progress, I think I have learned some pretty simple rules for launching a startup, and particularly in today’s funding reality. These 10 tips are not the usual business-school guidance, but rather the pure, unvarnished reality of what you need to do and be, in order to launch and fund a successful startup:

1) Fierce determination and the ability to see the truth is GOLD. Good entrepreneurs never, ever give up, and they always, always adapt their plan to what works, while rapidly abandoning what doesn’t work, no matter how much of their ego is invested in the outcome. Think Bill Gates. And, nothing ever goes according to plan. Self-delusion is very bad in startups, and it will cause you to squander precious capital chasing great technology for which there is no market. Or, big markets for which you have no useful solution.

2) If you have a vision for something that hasn’t been done yet, stick with it. People don’t know what they don’t know and they don’t want what they haven’t seen. Facebook? Really? Pinterist? iPADs? Instagram? Really?

3) Know who you are. And who you are not. Don’t try to understand how the berries actually grow in Legal, Finance and Compliance. Think Mark Zuckerberg. Hire good lawyers and accountants when you can afford them. Look in the mirror. That’s who you are. Be that.

4) Become a great story-teller. Learn how to tell your story to investors in 15 minutes or less. Unfortunately, you must use PowerPoint. Never read from the slides. Pictures are worth thousands of words. Think about what you’re doing as if you were showing a trailer to a film and you want the audience to come see it. Think about all the trailers you’ve seen and make your pitch as compelling as the best of the best. Top Gun would be a good place to start. If this is your trailer, is your audience going to be interested in watching the film or not? Think Steve Jobs. If you can’t tell a convincing story, you’re done. You don’t get the second date. It’s like speed dating, and you want to get to the real date. That’s what pitching to investors is about today.

5) What is your story about? People (and VCs are actually people) love and, more importantly, remember stories. Make it your story. Personalize it. Make your product or service come from your own experience. Why you needed to bring this to market and why it will change the world. It also needs to solve a really big problem, and one that VCs can relate to even if it doesn’t affect them personally. Your challenge is to bring your story down or up to their level of understanding, empathy and sensitivity. Create the “Ah-Hah” moment for them, so your story sticks in their minds. There is a ton of deal flow, and your story needs to rise above all those other business pans. The great news is that if you can do this well, you will find very few competitors. It is also what will set you apart as a leader.

6) Have a really great team. Not for the VCs, though they always fund the people over the plan, but have a great team for you. Your idea is not the company. Your team is the company. You are not the smartest guy in the room, and you can’t do this without them. You may have the vision or the technology or the marketing savvy to create huge markets, but without all of the other moving parts, you will not bring anything to market. If you are in love with your team, your investors will get it and if you aren’t, they will get that too.

7) Get the money. Many entrepreneurs get fixated on the size of the raise or worse yet, the valuation. You may believe that your amazing play is worth millions pre-money, but the fastest way to kill a deal is to come in with a term sheet that’s says you know nothing about how to valuate a startup. No one else does either by the way, but the key is reasonableness (just like in life) and VCs want to see a reasonable leader put forth a number that makes sense. If your revenue projection is conservative and it says you will be at $5M in 3 years and it will take $2M to get there, a fair pre-money valuation is probably $5M, which means you are willing to give up 40% of your company to get the money to start your dream toward reality. That doesn’t mean you should start at $5M, but it also doesn’t mean you should start at $12M. If you have pitched your deal 40 times and you find one VC willing to invest $1M, modify your plan so that you can make that $1M work.

8) Keep your powder dry. Just because you raised that $2M, doesn’t mean you have to spend it. Be really frugal. Pretend it’s your own money. Constantly ask yourself whether you would spend your own money doing whatever. Enlist other people in your dream. Now that you are a great story-teller, that should be easy. Get them to work for a lot less than they think they can or should. If they won’t, they don’t belong on your team. This is a startup. It isn’t GE.

9) You will make bad decisions. It’s OK. Recognize them when they happen and correct them really fast. Acknowledge your screw-ups to your team. Explain what happened and why you will never do that again. You will all learn.

10) Enjoy every minute of it. Work 80 hour weeks. Live on Pizza and coke. Push yourself beyond your wildest imagination. Lead. This will never happen again. Not this.

Best of luck. You will need all of it you can get.


The Other Really Big Bubble.

 

 

Municipal Bankruptcy – What if every major city in America declared bankruptcy? Who would bail them out? What if the Student Loan bubble bursts in a few months, or if Congress fails to extend the low interest rates this coming July, or the US Banks are really over-extended in Europe? Interesting questions.

As I had posted earlier a few times, the future of American cities now hangs in the balance, as the truth starts to seep out and the predictions of street analyst Meredith Whitney — on 60 Minutes in December, 2010, that there would be 50 to 100 sizable municipal bond defaults — have started to become famous, because she was right. She may have been off a year or so, but her view is now coming true all over America. Mostly because of run-away pension costs, but also due to amazing acts of administrative stupidity: a $300+ Million incinerator program in Harrisburg, PA that the city had no funds to pay for, or a $4.23 Billion deficit due to un-funded infrastructure spending in Jefferson County, Alabama.

Her predictions came just at a time when federal stimulus money that helped states weather the recession was scheduled to end. States then started passing the fiscal pain down to localities by cutting aid to them. Meanwhile, localities had already been through several years of belt-tightening, with the worst yet to come: the likelihood that property taxes will decline in 2011 and beyond.

The culprit is a decade of over-spending by governments, especially on pension guarantees, and an economic slowdown that refused to flip into a robust recovery. The money just isn’t there. And it’s not going to be there even if local governments raise taxes while cutting employees and services to the bone.

Chriss Street was the treasurer of Orange County, Calif., from 2006-2010. And back in 1994, he warned that Orange County was headed for what would become, in November that year, America’s worst municipal bankruptcy. People didn’t listen then. They’re not listening now.

“State and local government revenues are taxes and fees on the private sector and housing,” Street said. “The bulk of this tax collection is subject by law to an approximately 18-month lag in collection. The recovery in real estate peaked out in November 2010 and economic activity peaked around April 2011. Both real estate and the economy are in substantial decline.” Therefore, tax collection will be falling all through the first half of 2013, and probably beyond.

“Most states, counties, cities and school districts have spent their cash reserves down to the legal minimum,” Street said. “When I speak at national conferences on municipal finance, I ask the question: ‘How many of you have made contingency plans for another 15 percent decline in revenue in the next year?’ I have never gotten a hand raised. Consequently, it is my belief that there is the potential for thousands of defaults in the 50,000 municipal bond issuers in the United States.  Most cities can cut spending, but they cannot cut principal and interest payments without default and bankruptcy.” And, why do you care? Maybe you own Bank stocks. Maybe you might look into your Bank’s position relative to Bonds and debt with munis. Just saying.

Do You Know The Way To San Jose.

An example of where so many cities are going is San Jose, Calif. Unlike some small cities facing bankruptcy, such as Central Falls in Rhode Island, San Jose remains highly prosperous. It’s not a dead-end rust-belt town. San Jose enjoyed the dot-com prosperity of the late 1990s, then the real-estate boom of the mid-2000s. The ensuing real-estate bust was milder there than in most places. It still prospers from being part of Silicon Valley, the epicenter of the world computer revolution that’s booming again, despite the global economic slowdown. Apple’s HQ is a stone’s throw away in Cupertino. Facebook is just a little further north in Palo Alto.

But San Jose officials have discussed bankruptcy as a possible option.

Its prosperity turned out to be its undoing. In the November 2011Vanity Fair, financial writer Michael Lewis wrote, “the city owes so much more money to its employees than it can afford to pay that it could cut its debts in half and still wind up broke.”

The problem for America’s 10th-largest city, population 1 million: “The Internet boom created both great expectations for public employees and tax revenues to meet them….  Over the past decade, the city of San Jose had repeatedly caved to the demands of its public-safety unions. In practice, this meant that when the police or fire department of any neighboring city struck a better deal for itself, it became a fresh argument for improving the pay of San Jose police and fire. The effect was to make the sweetest deal cut by public-safety workers with any city in Northern California the starting point for the next round of negotiations for every other city.”

This ratchet effect also struck areas throughout the rest of California and the United States.

According to Mayor Chuck Reed, a Democrat, “Our police and firefighters will earn more in retirement than they did when they were working. There used to be an argument that you have to give us money or we can’t afford to live in the city. Now the more you pay them the less likely they are to live in the city, because they can afford to leave. It’s staggering. When did we go from giving people sick leave to letting them accumulate it and cash it in for hundreds of thousands of dollars when they are done working? There’s a corruption here. It’s not just a financial corruption. It’s a corruption of the attitude of public service.”

While costs have been ratcheting up for San Jose, city staff levels have been ratcheting down. City staff has been cut from 7,450 to 5,400. The number of staff is the same as that of 1988, before the city added another 250,000 residents. By 2014, the number of city staff could be as low as 1,600. Reed warned, “There is no way to run a city with that level of staffing.”

San Jose’s fate could rest on the decision of voters. As Ed Mendel of CalPensions wrote in December 2011, “The San Jose City Council voted 6-to-5 … to place a pension reform measure on the June ballot that takes on what the Little Hoover Commission called ‘the elephant in the room,’ a way to reduce the cost of pensions promised current workers. As state and local governments face rising pension costs while a weak economy forces deep budget cuts, the San Jose council’s plan is the biggest and boldest proposal yet by elected officials to reduce pension costs widely believed to be legally untouchable. Mayor Chuck Reed had talked about declaring a fiscal emergency to reduce pensions earned by current workers in the future. Now he is talking about the city charter specifying minimum benefits provided by the city’s two independent pension systems.

With the economy still underperforming, there will be no rescue for public budgets. There’s no dot-com boom or real-estate bubble on the horizon. As we have seen, those booms were unsustainable anyway, and just encouraged unrealistic expectations about municipal revenues and portfolios.

What has happened is that at least 12 years of delusions finally are wearing off, and everyone is being forced to meet reality. For most governments, the easy fix, if one could do it, would be just to switch all future pensions for current employees to 401(k) plans. And for those facing bankruptcy, the additional fix would be to cut payouts to existing retirees, as Central Falls (Rhode Island) is trying to do. But employee unions, not surprisingly, are resisting any changes to current benefits.

This is the same discussion that is happening all across America in big and little cities and local municipalities. Bankruptcy doesn’t cure any ills for the cities and particularly for its residents. It simply postpones dealing with the reality for a while. And, in the meantime, your city turns into Vallejo, California, where when you call the Police, they tell you to fill out a form and mail it in. Either the administrators raise taxes or the unions cave on decades-old contracts. One of these things, or maybe both have to give and soon, or Meredith Whitney becomes the smartest guy in the room. And, your police and fire suddenly can’t protect you from harm anymore.


Facebook to Reach 1B Active Users in August, That’s 14% of the World!!!

Yikes!!!

Facebook Growth

Facebook is soon to have 14 percent of the world’s population all to itself. A new study says the social network will hit one billion users this year.

Gregory Lyons, a senior analyst at digital marketing firm iCrossing, ran the numbers based on Facebook’s past growth and found that Facebook will probably hit the milestone in August 2012. Currently, it has 800,000 users. He found that Facebook initially grew at an exponential rate, but then went through a slow down in progress, which caused it to grow more linearly. The slow down was a result of the United States and the United Kingdom tapping out at 49 and 47 percent of the population respectively. New signups from those countries have “slowed or stopped”.

Google+ Growth

 

It seems that Facebook’s Googleadversary, Google+, is still in exponential growth mode, reaching the 62 million mark in six months, according to statistician Paul Allen. It took Google+ only 2 months to reach 10 million users, a milestone that took Facebook 38 months. However, Google+ has been born in the age of social. It’s not creating anything new by way of industries. Facebook still remains the ultimate social player outside of Silicon Valley.

Allen suspects that Google+ will hit nearly 400 million users by the end of 2012, due to accelerated Android sign-ups. However, according to a recent study by analyst firm Nielsen, Facebook’s application is the most popular on Android devices, falling second only to the Android Marketplace. The study takes into account users from 18-44 years of age and found that roughly 80 percent of these people are using Facebook’s app more than any other app on the device.

The push to one billion active users will come from developing countries, according to Lyons. Specifically countries such as India and Brazil, which are poking their heads out as late adopters. In the last nine months, India has grown from 22 million users to 36 million. Brazil is following close behind at 30 million, up from 13 million nine months ago.

The growth is just more support for Facebook’s potential 2012 debut as a public company, which some are saying will be a $10 billion IPO. Only three other US companies have had $10 billion or more IPOsAT&T at $10.6 billion, GM at $18.1 billion and Visa at $19.7.

The timing of the offering is still up in the air, though an August projection is starting to look pretty good.


Dow Jones Said VCs Had a “Lackluster” 2011, Recession Still in Effect.

Don’t let the good times roll just yet, Silicon Valley:  Analysts at Dow Jones are saying the effects of the 2008 economic crash still haven’t worn off for venture capitalists. This is actually a good thing for the industry as weaker performing VCs fail to raise new funds and are squeezed out in the process.
While U.S. VC funds finished the year with a strong fourth quarter of fundraising, funds raised by VCs during 2011 came in at barely more than half of the 2008 total.
“The industry has not yet bounced back from the recession,” said a Dow Jones spokesperson in an email.
The numbers for 2011 were slightly higher than those from 2010 (by 5 percent, to be exact), though that was largely driven by activity in early-stage funds. All told, 135 U.S. venture capital funds raised $16.2 billion, representing a 12 percent decline in the number of funds raised this past year.  Fundraising for the fourth quarter alone came to $5.2 billion — that’s more than the total funds raised during the second and third quarters put together.
While the state of VC fundraising in the U.S. could best be described as “meh,” the story in Europe was even less positive.
European VCs, said Dow Jones, hit a record low in 2011, when 41 funds raised just $3 billion in 2011.  This represents a year-over-year deep decline — a 20 percent drop in the number of funds raising cash and an 11 percent drop in the total amount raised.
We asked Dow Jones for some historical context — just how much have funds dipped and surged since the 2008 crash? “You’ll see that investment in early-stage and multi-stage funds dropped significantly between 2008 and 2011,” said a company representative, who kindly provided us with data for the graphs we’ve created below. “Later-stage funds, however, are faring better in terms of capital collected having raised $4.7 billion in 2011 versus $3.9 billion in 2008,” the rep concluded. “The drop in the number of funds collecting capital is also notable and shows consolidation in the industry.
In 2008, 205 funds won commitments from Limited Partnerships. In 2011, 135 funds won commitments.”


“While brand-name firms are able to raise funds, most firms face significant challenges in fund-raising,” said VentureWire editor Zoran Basich in a statement.

“Limited partners remain wary of the industry after a decade in which returns have not matched expectations. Unless that changes, limited partners are likely to stick with what they view as the tried-and-true fund managers.”


Buyosphere Raises $325K, Relaunches as Q&A for Shoppers

Great play! Interesting space.

Buyosphere is web celebrity Tara Hunt‘s greatest gamble,  and after some shaky months, it might be starting to pay off.

Following a successful rebranding effort, the team has just closed an oversubscribed seed round of funding — $325,000, to be exact.

The funding will be aimed squarely at new user acquisition as well as a couple key hires.

The round, which eschewed big-name Silicon Valley capital for firms and individuals based closer to Buyosphere’s Montreal headquarters, was led by Real Ventures, Canada’s largest seed venture fund.

Also participating were angel investors Jesse Kaplan of Seek Capital, John Granger of Grassfed Capital, David Chamandy of Machkor Holdings and Thomas Merlin.

Part of today’s news is Buyosphere’s pivot. Previously, the startup was focused on providing a shopping and fashion-focused community with links to purchase history but without invasive cookies.

The company’s pared-down mission is now providing a Q&A platform for shoppers. Hunt calls it “a Quora for shopping.”

“We’re demonstrating the power of peer to peer shopping search,” Hunt said in an email with VentureBeat. “Algorithms are a long way off from picking up nuances that a person can. And personal taste is full of nuance.”

Eventually, the Buyosphere team, which includes co-founders Cassandra Girard and Jerome Paradis, hopes to revolutionize online product search through a combination of social search and intelligent use of data.

“We invested in Buyosphere because they are tackling what is fast becoming a large problem in e-commerce,” said Real Ventures partner Mark MacLeod in a statement.

“Today’s online shopper is faced with almost limitless choices but severely limited time. Buyosphere offers customers a solution combining personalization, curation and social features to help connect consumers and brands.”

While the amounts might seem small to someone accustomed to the mega-rounds raised by San Francisco-based startups, Hunt says even a little money goes a long way in Montreal.

“There is considerable talent in the area and we are well-situated to retail and fashion hubs like New York,” she concluded. “It’s the best of both worlds.”