Why Did Facebook Oust Chief Financial Officer Gideon Yu?

I just posted a blog entry on Gideon Yu’s departure from Facebook on the BW blog TechBeat.

Here it is.

Very surprising news out today in Silicon Valley. Facebook has let go of its chief financial officer Gideon Yu, reports the Wall Street Journal.

Facebook spokesman Larry Yu confirmed to BusinessWeek that CFO Yu will be leaving the company.

Now the big question is why?

The WSJ’s Jessica Vascellaro speculates in her story that the company needs to get a new CFO because it is thinking of going public more sooner than expected. The search for a replacement, she writes, is “likely to renew speculation that Facebook, which has previously said it hopes to go public within the next few years, is stepping up plans to do so despite the rocky economy.”

Click here to read the rest of the story.

It’s Official: Twitter Hires Ex-Google Designer Douglas Bowman

Turns out the Web rumors were true for once. In a meeting last Friday afternoon in Twitter’s San Francisco office, Twitter co-founder Biz Stone told me that the company had hired ex-Google Visual Design Lead Douglas Bowman to be the company’s new creative director.

Bowman will replace Stone, who was acting as Twitter’s creative director. “The Twitter Web page looks pretty simple,” says Stone. “But from our perspective the design needs a lot of work.”

This is a great hire for Twitter, and more proof that Twitter has replaced Facebook as the tech industry’s hottest startup. Bowman probably could have joined Facebook if he wanted. But the talented designer, who used to work at Wired News, clearly sees a bigger opportunity at Twitter, not only from a design perspective but perhaps from a monetary one as well.

Bowman will be a much-needed presence as Twitter expands and tries to handle the enormous design challenge of helping Twitter users to manage the increasingly large amount of information flowing through the Twittersphere.

Bowman caused a bit of a stir when he announced his departure from Google in late March. In a candid post on the blog of his design consultancy stopdesign, Bowman said he left Google because of what he described as the company’s slavish obsession with data.

“I had a recent debate over whether a border should be 3, 4 or 5 pixels wide, and was asked to prove my case,” wrote Bowman. “I can’t operate in an environment like that. I’ve grown tired of debating such minuscule design decisions. There are more exciting design problems in this world to tackle.”

Not surprisingly, it appears as if Bowman digs Twitter. He seems to have joined the service on or around March in 2007. His first tweet appears to have been posted from, what else, South by SouthWest. “mellowing at the Driskill,” wrote Bowman. “my lord there’s a lot of people at sxsw this year.”

But Bowman is far from prolific or Scobel-like. He only has published 401 tweets over the last two years. Apparently, Bowman has to work for a living.

He is pretty popular, though. Bowman currently has 3,677 followers yet he himself only follows 93 people. Among the select crew of people that Bowman tracks are: San Francisco Mayor Gavin Newsom, Biz Stone, Tina Fey, designer Derek Powazek, Google senior vice president Jeff Huber and blogger Anil Dash.

It’s Here! The Kindle Edition of Creative Capital

I am happy to make a little news of my own on this blog. The Kindle edition of Creative Capital is now officially available.

Please click here to see the Amazon page where you can purchase the Kindle edition for $9.99. You can sample the beginning of the book for free says Amazon.

One big and obvious upside of the electronic edition of the book is that it’s much cheaper than the hardcover, which costs $23.10.

A small downside: we did not include the book’s photo insert. Why? Because I would have had to pay somewhere between $500 to $1,000 to purchase the rights to license the digital rights of some of the photos.

I have no idea how many copies of the Kindle edition have been sold but it looks like someone actually figured out a way to buy it. My Kindle ranking on Amazon is higher than the ranking for the hardcover edition of my book. Perhaps a few folks bought it after I made the initial announcement at the Stanford Global Technology Symposium. On Friday I moderated a panel on corporate venture capital with top execs from IBM, Google and Microsoft.

According to Amazon, Creative Capital and over 245,000 other books are available for Amazon Kindle. You can sample the beginning of the book for free according to Amazon.

Allegis Capital: A New Venture Capital Model for Today’s IPO-Free Market

When you’ve been covering a beat for 15 years you think you know pretty much everyone you need to know. But one of the great things about Silicon Valley is the technology industry’s depth of talent. There are so many high quality people and it’s a blast when you make a new connection.

So it was a real pleasure when recently met Robert Ackerman, the co-founder of venture capital firm Allegis Capital. Check out this story I wrote this week about Bob and his venture firm, which is doing some real innovative work on the venture scene. As an extra bonus for my blog readers, I also added a two-minute video I shot with Bob at the office that wasn’t included in the BW article.

Can Venture Capital Come in from the Cold?
Allegis Capital and a handful of boutique firms are eyeing new investments amid a crisis of confidence among Silicon Valley VCs

By Spencer E. Ante

These days, many venture capitalists resemble mice, afraid to invest in the rough economy. But a few firms remain upbeat and aggressive, ready to pounce like a tiger.

One is Allegis Capital, a 12-year-old Silicon Valley VC firm that’s smelling opportunity amid a fearful market. Allegis doesn’t have a marquee name, but it’s put together one of the most impressive track records of any venture firm in recent memory.

Last July, Allegis sold Ribbit, a telecommunications provider it backed, to BT Group (BT) for $105 million. In 2007, it sold computer security company IronPort Systems to Cisco Systems (CSCO) for $830 million. Over the past four years, six companies in which Allegis has invested have sold for a total of $2.1 billion. “Venture capital is not broken,” says Allegis Managing Director and co-founder Robert R. Ackerman Jr. “Innovation is alive and well.”

That’s not the conventional wisdom in venture investing. The market for taking startup companies public has ground to a halt. The value of startups has fallen. And avenues for selling companies to corporate acquirers have narrowed while fundraising is scarce. Some investors have asked whether the venture capital playbook of raising large sums of cash and betting on a few home-run deals is in need of revision.

Yet smaller funds such as First Round Capital, Maples Investments, and angel investor Ron Conway’s Baseline Ventures continue to invest amid the economic downturn.

Read the rest of the story here.

Facebook Is Hunting for $100 Million

Hallelujah! The Facebook scoop I’ve been sitting on for days was just published last night on BusinessWeek’s Web site. Check out the top of the story here:

Facebook Is Hunting for More Money
The social-networking site wants as much as $100 million in debt financing, sources say. Facebook’s accelerating user growth carries huge tech costs

By Spencer E. Ante

Facebook, the fast-growing social-networking Web site, is one of the many companies looking for additional financing as banks and other lenders become increasingly careful about extending credit.

Over the past few weeks, Facebook has been trying to secure as much as $100 million in debt financing, according to two sources with knowledge of the proposed transaction. Specifically, the company is looking for a handful of credit lines that would help it finance leases for the growing number of computers it needs to run its popular Web site. Such leases are used by well-known companies, including Google’s (GOOG) YouTube video service, and are a common way to finance equipment purchases in Silicon Valley.

Facebook has been shopping for credit from a number of large financial institutions, including Bank of America (BAC). The Charlotte-based bank, already Facebook’s primary commercial bank, received $25 billion from the federal government as part of the effort to relieve the credit crisis. Facebook has not yet secured new debt financing from Bank of America or any other lender, according to the sources. It is continuing to try to line up credit lines for leases and is considering other forms of debt.

A Facebook spokesman says the effort is simply part of the normal course of business. Equipment leases offer lower up-front costs and certain other advantages over purchases. “Facebook always seeks to keep its costs of capital as low as possible, particularly in these uncertain economic times,” the company said in a statement issued to BusinessWeek. “Along with other Silicon Valley companies, we rely on a range of tools to do so, including equipment lease lines to acquire equipment.”

Read the rest of the story here.

New Review: Venture Capitalist Brad Feld Gives Creative Capital Five Stars

Check out this review that Brad Feld, co-founder of the Colorado venture capital firm Foundry Group, recently posted on my Amazon page.

5.0 out of 5 stars
Fantastic History of the Venture Capital Business
March 16, 2009
By Bradley Feld (Eldorado Springs, CO USA)

Most people that have been involved in a VC-based tech startup have heard the parable of General Georges Doriot and his famous $70,000 investment in Digital Equipment Corporation. However, few people actually know the full (and very extensive) story of Doriot and the creation of the Venture Capital business.

Spencer Ante does an awesome job of telling this incredible history. As a former entrepreneur and now VC, I’ve read many books that touch on parts of the history and have heard many anecdotes. Spencer brings them all together in one concise, well-written, fast paced book.

Every entrepreneur and VC should, along with anyone that is involved in creating companies, should read this book.

Obama’s $8 Billion Broadband Stimulus: Opportunity or Risk for Big Telecom?

Check out the new video I shot about the $8 billion Obama broadband stimulus and what it means for the nation’s largest telecom companies such as AT&T, Verizon Communications and Qwest. I shot it in preparation for the big online Web video project launching in late April. Hopefully I can tell you more about this very soon. But in the meantime, please enjoy the video!

Repost: Harvard Professor’s Plan for Fixing the Banking System

I have never reposted a post on this blog but I am going to make an exception today.

The reason? In mid-February, I blogged about a Harvard professor’s plan to fix the banking system. The essence of the plan was to use public money to subsidize the creation or financing of numerous investment funds that will be privately managed and dedicated to buying troubled assets.

This morning, Treasury Secretary Geithner announced a plan to buy toxic assets from the banks that looks very similar to the plan I touted. More important, the financial markets are applauding the plan and think it could actually work.

The big challenge now is that the public is so outraged at Wall Street that Congress may increase taxes on the potential profits of these funds.

That would be a BAD IDEA for two reasons. One, it would scare away large swaths of the investment community from actually participating in the program. Two, the public already stands to be benefit because the U.S government will be providing up to 50% of the equity capital of these funds. So we are part owners of the funds.

Here is the old post:

Now that Obama has pushed through a stimulus package, his administration has to crack a much tougher nut: Putting the banking system on sound financial footing and re-opening the credit markets.

We all know that TARP I has not worked out as planned. Yes, it averted a total catastrophe. But the banks are still not lending that much and the credit markets remain closed to all but the most stable companies. Our capitalist system remains a giant clogged artery in need of major bypass surgery.

So far, I have not heard any great ideas that could help solve this incredibly complex challenge. And there is no consensus emerging around how to get the banks to sell off the hundreds in billions in toxic assets clogging their balance sheets–unlike the stimulus program, which was a far easier problem. CNBC’s Dennis Kneale just floated an idea from an unnamed stock trader to turn the toxic assets into exchange traded funds.

But yesterday I got an email from Harvard touting a new plan and paper from Harvard Law School professor Lucian Bebchuck. His proposal to establish a “significant number of competing funds that will be privately managed and dedicated to buying troubled assets – not on creating one, large public-private aggregator bank” is the best idea I have yet to hear.

I think it has a shot at working because it designed to introduce much more competition in the market for these distressed securities–unlike one single “bad bank” that would only inject a limited amount of competition.

One myth about the current financial crisis is that there is no market for these troubled assets. That is just not true. Some of the smartest hedge fund managers in the world are trawling through these assets and scooping them up for super-cheap prices. Hedge fund kingpin John Paulson, for example, believes some of the best investment opportunities in 2009 and 2010 are in distressed mortgages.

So there is a market. It just needs to be far far bigger and more active and liquid so the majority of these assets can be bought and taken off the balance sheets of the banks. Bebchuck’s plan to use public money to create 25 or so new subsidized but privately run and financed funds designed to purchase these assets just might be able to spur the creation of that market.

“Establishing competing funds, I show, is necessary both to securing a well-functioning market for troubled assets and to keeping costs to taxpayers at a minimum,” writes Bebchuck.

“Each new fund will be partly financed with private capital, with the rest coming (say, in the form of non-recourse debt financing) from the government’s Investment Fund planned by the Treasury. One important element of the proposed design is a competitive process in which private managers seeking to establish a fund participating in the program will submit bids as to what fraction of the fund’s capital will be funded privately.

The government will set the fraction of each participating fund’s capital that must be financed with private money at the highest level that, given the received bids, will still enable establishing new funds with aggregate capital equal to the program’s target level. Overall, I show that the proposed design will leverage private capital to the fullest extent possible and will provide the most effective and least costly mechanism for restarting the market for troubled assets.”

Click here to read the entire paper.

Come See Me Speak at Stanford Next Friday

A quick speaking update: I have been invited to moderate a panel at the Stanford Global Technology Symposium on Friday March 27. The event will be held at the Arrillaga Alumi Center on the Stanford campus. This year’s theme couldn’t be more timely “Entrepreneurship and Investment in a Turbulent Economy.”

T. Boone Pickens, Facebook COO Sheryl Sandberg and venture capitalist Steve Jurvetson are giving keynote addresses or fireside chats.

We’ve got a great panel. The topic is corporate venture capital and we’ve lined up top executives from IBM (Claudia Fan Munce), Microsoft (Dan’l Lewin) and Google (David Lawee) to participate. My panel is from 3pm – 4pm.

Please come and say hello. I may be selling books afterwards.

Entrepreneurs + VCs = Goodness (And why it will help lift us out of the Great Recession)

Yesterday, venture capitalist Brad Feld published a candid post in which he made the argument that entrepreneurs played a much more important than financiers in the startup ecosystem. Even though I wrote a book highlighting the importance of VCs, I totally agree with him.

It’s the entrepreneurs that drive innovation. They are down in the trenches building the businesses every day. They create most of the value.

However, without risk capital, the startup system ecosystem would be far less powerful and effective at generating innovation. You simply can not build a business without capital–even in these capital efficient Web 2.0 days. Look at any survey of a small business and the top concern is always money–having enough of it to run your day-to-day operation and getting more to grow the operation.

One of the big reasons that America is the world’s engine of innovation is that we were the first country to develop a professional and robust venture capital market. Now, other countries are following us, but our risk capital market is still one of the nation’s competitive advantages.

It’s also one of the reasons why I think we will lift ourselves out of this recession more quickly than we did in the Great Depression. There was no venture capital market in the 1930s. We have one now and the capital being put to work in startups will create companies and markets that will help grow the economy and revive our animal spirits. In fact, as I detail in my book, the VC industry was born out of the Great Depression when a group of businessmen in New England in the late 1930s realized the U.S. had created a “risk-less economy” and needed to find new ways of creating new companies.

I struggled with this tension in writing my book. I was writing about a VC but I came to see that what I was really writing about was the birth of this startup ecosystem, the entrepreneurial economy. I was writing about the largely symbiotic relationship between the entrepreneur and the venture capitalist. You can’t talk about one without including the other.

Sure, there will always be tensions between owners of a business and the managers. And that’s OK. But instead of pitting entrepreneurs against VCs I think it’s better and more appropriate to view them as partners in a mutually beneficial relationship.