On rock stars

LinkedIn recently announced it had raised $53m on a $1bn valuation. This comes on the back of facebook’s more recent $100m, as well as Slide and RockYou getting $50m and $35m respectively. When Marc Andreessen raised $60m for Ning he said it was to survive the ‘nuclear winter’.

Now all these companies have two things in common, big names and big VC dollars. I always found the idea of rock stars faintly absurd. Does a rock star developer go up on stage at Glastonbury and code as screaming fans egg him on? The other day I read The Talent Myth by Malcolm Gladwell. In it he argued that a culture that promotes and pampers rock stars sows the seeds of its own failure.

A few weeks ago I heard a VC who had backed a number of successful ventures bemoan the fact that rock stars were great at raising money but not at making it and that he now preferred hungry unknowns. What I find odd about all this money raising is that all the real stars of the previous generation started making money fairly early on and didn’t have to raise huge sums on massive valuations. Google took about $26m in total from an angel round and a Series A before getting a reliable revenue stream which has sustained the company ever since.

In backing these rock star encrusted ventures VCs are ignoring the lessons of their own history. Google, Apple, Microsoft, eBay, PayPal, Yahoo were all started by unknowns. All the founders were outsiders whose ideas were initially rejected but still believed in what they were doing and carried on.

It reminds me of British tennis. Every year the LTA pumps more and more money into better and better facilities, coaches, everything, ensuring that young British players have the best of everything and yet they still fail. What nobody has considered is the possibility that lavishing them with everything is what causes them to fail. They are so well tended to they have no hunger. Contrast the rise of Serbian tennis whose current crop of winners had to play on cracked courts with almost no facilities in between being bombed by Nato.

Read more:
On spray and pray
On $100m and $15bn

On spray and pray

I might win an Audi A3 – nice!

Or so RockYou tells me along with its not annoying at all involuntary music as soon as I access the site. This has not put off investors who have just stumped up $35m according to TechCrunch. I suppose the ultimate plan is to throw a million widgets against the wall and see what sticks.

There’s a line in the Lacy book describing the dissonance between a line of intense young men working on sparkly glitterballs for 13 year olds to clutter up their facebook pages with. I’m sure they will be able to sell advertising in this stuff one day but I think it’s going to be a low value game.

Yahoo’s problem is that it is stuck with all the low value advertising while Google hoovers up all the big money by delivering better targeted ads. I’ve said before there should be less advertising but it should be more useful. Google succeeds because it manages this. Slide and Rockyou have not cracked it yet with Slide’s founder suggesting advertising may not be the way forward. I think it is possible for widgets to generate revenue direct from users but once you have given something away for free it is mighty hard to get users to pay for it. And VCs won’t pay forever.

On Arseblog, OleOle and facebook

On Wednesday one of my favourite non-technology blogs, Arseblog, was acquired by OleOle, the football centric social network. I’m not even an Arsenal fan but Arseblogger is one of the best writers around and I always enjoy reading his entertaining posts on the ups and downs of the Flamster et al. He’s there 7 days per week come rain or shine with something interesting to read, even for the general football fan and this has led to the acquisition by OleOle.

OleOle is a football social network. I know that niche social networks are the new thing and I can sort of see the value in one based around the worlds biggest sport. That said I started out as a social network sceptic and I am not totally cured. Any new venture, OleOle included, faces the facebook dilemmas – Why can’t I do this on facebook? and Why should I be arsed to set up another account somewhere else?

Also facebook, brilliant though it is, still has the feel of a Google looking for its Adwords. There is no doubt that facebook can sell things, I’ve bought stuff after seeing updates from my friends and I can begin to understand the $15bn valuation since FB will be worth a lot more if they crack it. I have no idea what is going on inside facebook but from the outside it looks like a fair amount of stumbling around. As far as I understand it most of their cash comes from a big ad deal with MS which is not really a good basis for an independent business.

I see the merit in opening up the platform to developers – if even a tiny percentage manage to develop a money generating widget facebook is in the hay without having to do anything. The problem is that none of the widgets make any money (please correct me if I’m wrong) not even Slide with its pedigree. Levchin himself recently conceded that startups had to look beyond advertising but that $80bn by 2010 pie which drew MS to Yahoo looks mighty inviting and most people can’t take their eyes off it even though they know Google will eat most of it.

FB has a chance too but it needs to make it far easier to buy straight from the site then take a cut from the sale. I’ve already told FB what my favourite films are and through that it can link to other like minded people and recommend me things I might be interested in. FB doesn’t do this right now – at least not in any way I notice when I’m using it.

Ultimately that’s all advertising is – getting people you trust to recommend things you like. One of my favourite film reviwers is Matt Cale, every time he releases his top 10 films of the year I buy the number one sight unseen and I’m never disappointed. I never would have bought Cocaine Cowboys were it not for his review but he doesn’t see any cut from the sale. And I won’t see any cut when you rush to Amazon to buy it either, but you will buy it.