DISQUS

Well, GOOG is down about 4.5% (at 11:20AM) which is below the market average right now.

When does GOOG normally report their 10Q's after end-of-quarter? Do they typically issue warnings (if the need to)?

However, I think Q4 results will be the real canary-in-the-coalmine.

I think this was covered already in the comments, but I still have a wait-and-see attitude regarding operating results of some of these companies that you mention. Because of the positioning of the current situation as the "worst event since the Great Depression", I think consumer products are going to get hammered by consumers reducing spending.

Remember, the AdWords/CPC model of advertising of Google has never been Recession test. In reference to yesterdays posting, I think many internet companies - startups and established firms - have been over-optimistic about ad-support services. I'll be looking forward to Google's Q3 and Q4 results.

Anyone have a sense on how Google's revenues are holding up?

Thanks for the info.

Question: has Russia - since the default - been heavily reliant on debt financing? If so, what is their rating level (if there is some aggregate rating)? Do investors trust Russian commercial paper in the global marketplace?

Touche!

Amen, Fred.

Has anyone compare our current situation to the Russian Default of 1998?

The timing of this post is interesting because on my subway ride to work, I was also thinking that maybe too many people are assuming that the world market will be interested in buying $700B in U.S. Treasuries. Maybe they will, maybe they wont. However, everyone is going to ask whether the U.S. - as a whole entity - is financially sound, which it isn't. Ultimately that's going to affect the credit rating and raise the risk profile and thus raise the interest rates that will be expected to compensate for that risk.

Will it be possible for Americans to become savers again instead of spenders at both the individual and governmental levels? I posted a few weeks ago how we - as country of people - went from saving about 20% of take home pay in the 1940-50's to basically 0% (also a tad under 0% for awhile lately).

Then if American's save in secure accounts, that's going to have a severe impact on corporation's operating results as fewer goods are consumed. That's not terrific either, but at least people will have squirred away some cash.

As you say, lot's of tough decisions.

Is it too late for Bloomberg to run for president? Seems like the right guy to clean up the mess.

Since you describe seed-stage funding asbeing the first to dry up in late VC funding economic cycles, when do you expect - if it's at all visible now - that window to re-open? Obviously, there are many dependencies at hand here which may extend timelines, but if it is cylical by nature, when would it normally come around again.

Igor,

Morgan Stanley just reported strong profits (although certainly down) and they too are being forced in a position to react through merger discussions. So, I think your analogy to dot-coms which were largely not profitable (some even without substancial revenue) is off here. Investment banks do indeed have a lot of business, it's more a liquidly crisis than a revenue crists.

- Chris

Not trying to be overly sensitive - and I'm sure Andy meant to be ironic, but I have to take exception to the perception that savers are really just "stupid" and "lazy".

A *huge* problem, in my opinion, is that the savings rate of Americans has widdled over the year to basically 0. I think for a momemnt it went under 0. Consider that the saving rate was in the 20% rage back in the 40's, (source http://bigpicture.typepad.com/comments/2005/08/...)

In generally there's a micro/macro economic mirroring happening here: people and (some) corporations are relying too much on debt to finance their (desired) lifestyles [for people]/operations [for businesses].

It doesn't help to imply that people who keep cash in the bank (wow! what a concept!!) as being "lazy and stupid" because they don't seek higher returns in the marketplace. Ironically, for the last 12 months money in the bank would be the best and more wise investment.

Dare I ask, but how do you think such a "private secondary market" be regulated, if at all? In an above comment reply you refer to a "lightly regulated" market, but do you see a potential for deceptive practices and/or abuse?

Fred,

I would assume that Google's interest would be not in ROI on their use of cash, but rather using a VC arm to "incubate" - for lack of a better word - new products and attract entrepreneurial talent.

IMO, Google has hit a point in it's lifetime where is has too many non-core projects/products that end up being a distraction. As many others have said before, they do need to start focusing and showing a bit more discipline. Given their huge quarterly profits, it's easy to ignore these all of these side-projects that are going nowhere. However, I think the time has come for them to ratchet things down a bit.

Having a VC arm would potentially be a way to keep involved in such "blue sky" projects, however distance it a bit from their core operations. Personally, I'd rather see GOOG use their cash in such a manner than keep supporting lots of these tiny distractions and the resource-drain they inflict.

That said, I think any startup should think long and hard about what it may mean to have GOOG as an investor and whether there might be any potential conflicts of interests.

However, although the iPhone has a "web app" development approach with HTML/JS/CSS, there's still alot of interest in native iPhone apps for a number of reasons (namely offline and local DB support).

I'm sure there's a lot of people buying Objective-C books these days.

It'll be interesting to see upcoming Q2 and - later Q3 - earning reports from bell-weather consumer companies. That will be the canary-in-the-coalmine regarding how the current economic situation is affecting Main Street. Ultimately, I'm interested to see how online Ad spending holds up over the next 12 months, as so many startups are assuming they can run operations (and get a return on VC investment) through online advertising, primarily display advertising.

Fred,

Question: how much of this "bullish" VC investing in portfolio opportunities do you think is being driven by 10 year VC funds that are nearing the end of their tenures? 10 years ago (1998) we were in the middle of the Web 1.0 phase, so is there a lot of unused capital lying around from those funds?!?

However, I do sense that the recent rise in startup valuations will have to tick dowards to remove some of the risk from the investment. Also, I think one of the key Application drivers of Web 2.0 (online Video) is on the downward tail of it's investment lifecycle and there will be a large consolidation of online video companies H2 2008 and into 2009 as they burn through their series-C and even D money. Unless - of course - there has been solid progress made in online video monetization.

- Chris

Maybe I should have waited a little time before gushing.

I have a dead iPhone in front of me because I did the upgrade to 2.0 and I'm having the same problem as everyone completing the upgrade due to capacity problems @ iTunes. My phone is dead and I hope it comes back to life - without any data loss - when I can connect to iTunes.

I'd be betting that some people are getting fired today in Cupertino.

*grumble*

Fred,

Given your and your audience's interest in Social Media/Networking, I can understand people's tendency to see "game changing" events (such as the iPhone/App Store) through those lenses.

However, I believe that Apple's primary strategic interest in supporting 3rd party developers is in Enterprise applications. That is how they will compete against Blackberry and crack into Corporate IT markets.

There is a only slight viral aspect of the adoption curve of Enterprise software, whereby end-users adopt applications before they are sanction by the Corporate IT fellows. Basically, some influential early-adopter uses an application, brings it into the IT environment, advocates its utility, and then "infects" (for a lack of a better word) the rest of the staff.

Therefore, I'm not sure first-mover advantage is as strong here for Enterprise apps. It really comes down to solid Product Management - building features and functionality that solve real pain in the Enterprise/SMB market. For example, if SalesForce.com releases a solid iPhone app, it'll be a winner regardless if they ship it after other people.

As an aside, I find it interesting that Apple wants to enter into the Corporate IT market and BlackBerry (from the tone of some TV commercials that I've been seeing lately) wants to position their products for the consumer market. Is the grass always greener on the other side? Or just building out market share.

I'm still very bullish on Apple. They are doing all of the right things now, even outside of the iPhone. They are more than happy to let Microsoft/Yahoo/Google try to slug it out for online eyeballs while continuing to cleanly execute a well focused strategy.

There's absolutely no demand IPO market for a Flickr-like offering these days. Definately a sale, but to whom and how much?!?

Fred,

In reading this, I think you might enjoy reading Henry Jenkin's work on "Participatory Culture" . He's a Media Studies professor at MIT. Check him out if you get a chance.

Jeremiah, I assume you meant "..has become petty" (not pretty)

Fred, with terms like "regroup, refocus", I think you are thinking through this situation as if Yahoo were a seed/early-stage company, in a similar manner to the types of companies that you invest in at USV. However, it's a very mature and well capitalized company and I think some of this existential angst should have been dealt with a long time ago.

I don't have a dog in this fight, but I think if YHOO needs to re-group, get leaner, etc. there's an implicit underlying statement that the market cap needs to continue it's downward trend until some baseline valuation is established. Not that I have a clue what that should be. Seems like Yahoo is conceding that it's indeed primarily a content & services company requiring a partnership (i.e. Google) to help on the revenue side. I don't think that's what has been pitched to investors for the last 10+ years, so there's still some downward correction to occur.

That said, I wouldn't be surprised to see Yahoo go on an acquisition binge, which could be beneficial to the startup-community.

Sounds like you are proposing Yahoo turning into a sort-of startup incubator.

One has to be careful with publisher-assigned tags as that would just ultimately just lead to a lot of spam/falsified metadata . There needs to always be peer-review to validate the authenticity of the metadata.

Yes, this opinion is consistent with what you wrote about not forcing cross-leverging across portfolio companies. Do you feel your assessment of also applies to next generation incubators like Y-Combinator.

Taking your early-stage standpoint a bit further, one would arrive at an "incubator" which combines capital with operational teams under one roof. Do you have any insights why incubators (such as CMGI and IdeaLab) were considered to be such big flameouts last time around? In answering my own question, it seems like the did not keep the operational costs of their incubated "hatchlings" under tight control. As I recall, places like CMGI tended to follow the "get big quick" mantra and spent accordingly.

Thanks for the New Yorker link. However, I disagree with one statement about Steve Jobs being an elite visionary with groundbreaking innovations. In my opinion, he's a re-tooler of existing computing concepts and wraps them into high design, ease-of-use, and compelling marketing.

The "innovations" around iPods/iPhones/AppleTV have existed for years prior, but Jobs' talent has been in the re-packaging of technologies from a user-experience - including the experience of being marketed to - perspective.

Needless to say, he's completely turned Apple around through such steady incrementalism.

Sorry, I have to disagree with you here. I think the next generation of Mobile Internet Devices (read iPhone, Samsung Instinct) will be opening up a lot of application possibilities for specific veritcals and niches.

Timely post.

I'm putting together some proposals for a new Mobile Internet Device (read: iPhone initially) startup that will sell into the Enterprise. Coming from a Tech/Product Dev background my instinct has lead me to start writing the foundations of the product as a "nights-and-weekends" projects (I have a young family).

I spent a couple of days on writing code, then put on the breaks. I've done startups for my entire career and I feel comfortable with the Product Dev side of things and I don't see much business risk from that area. However, I've also learned that product only gets you so far, one needs to have a business strategy including well thought through Market Positioning and Go-To Market strategy, particularly when making an Enterprise product.

Therefore, I've been forcing myself to concentrate on a Business Proposal (e.g. Powerpoint Deck). Given my limit time to dedicate to this project right now, this has prevented me from advancing the code (and resulting demo).

So, my question to you is, for someone who only has "nights-and-weekends" time available (maybe 7-10 hrs/week) and is putting together a Seed Stage pitch, as an investor what would you like to see more put together: a functional demo or a refined business plan which is well thought through.

Obviously both is nice, but what would you recommend?