Risk-Taking Makes a Come-Back in Technology

Tech: The Return of Risk-Taking
Suddenly, there are mergers and acquisitions, IPOs, and investors galore. Will the reenergized industry lead the U.S. out of the Great Recession?

By Spencer E. Ante

In the past few weeks, Jon A. Woodruff, who heads up technology mergers and acquisitions in Goldman Sachs (GS)’ San Francisco office, has seen the mood shift in Silicon Valley. Tech companies are stepping up their dealmaking after a quiet year. In a span of 21 days, Goldman has worked on three major deals—eBay (EBAY)’s sale of Skype, Adobe (ADBE)’s purchase of Omniture (OMTR), and Dell (DELL)’s acquisition of Perot Systems (PER). “People seem more willing to take out their checkbooks again for the right assets,” says Woodruff.

The surge in deal activity is a sign of broader change: Risk-taking is making a comeback in the tech industry. The first three weeks of September saw $19.3 billion in technology mergers and acquisitions, up from $2.5 billion in August and $11 billion last September, according to Thomson Financial. Meanwhile, more companies are filing for initial public offerings, including such closely watched startups as Watertown (Mass.) battery maker A123 Systems. Venture capital investments are perking up, too. The micro-blogging service Twitter has raised a round of funding that gives the nearly revenue-free startup a valuation of $1 billion, according to several reports.

All this activity is being driven by a central idea: The worst of the recession is over, and it’s time to prepare for better times. Economists and other experts say many corporations put off technology investments during the downturn and are likely to step up spending to generate the productivity gains vital to the bottom line. Mark M. Zandi, chief economist of Mark M. Zandi (MCO), predicts that tech spending in the U.S. will increase 4% in 2010 and 10% in 2011, after dropping 10% this year. “I think we are at a turning point for tech,” he says.

Read the rest of the BusinessWeek story here.

Wicked Cool Recap: Boston Book Tour Pics

Big ups to Boston. Thanks to the hospitality of the Boston French Library and the local office of the pr firm Financial Dynamics, I spent three days this week in Boston giving book talks to several groups.

Each talk was a lot of fun but the most special event happened on the evening of Thursday Sep. 24, the 110th anniversary of Georges Doriot’s birth, when I addressed about 40 friends and associates of Doriot in his old townhouse on Beacon Hill. Many thanks to Jim and Cathy Stone for hosting the event at the house, which they bought from Doriot’s estate soon after he passed away in 1987. As you will see from these photos, the house is a unique and sparkling gem.

Spencer Ante, Library Chairman Gerard Mouflett and Library Executive Director Catheline van den Branden

Guests mingling in the downstairs dining room

Jim Stone welcomes guests to his home in the second floor library

Spencer Ante giving a talk about Creative Capital

Guests listening to my talk. The Stones did not rearrange their furniture so the setting was very intimate.

The ARD Men: Francis Hughes, John Shane and James Morgan

VIew from second floor balcony overlooking the dining room

Digital Equipment’s first salesman, Ted Johnson, and current ARD head Francis Hughes

Is Twitter Worth a Billion Bucks?

Check out this story I worked on with my colleague Stephen Baker.

Is Twitter Worth a Billion Bucks?
Twitter’s latest funding round values the microblogging site at $1 billion. Can the company become profitable enough—or profitable at all—to justify that valuation?

By Stephen Baker with Spencer Ante

Twitter’s home crowd can be pretty tough. When reports emerged on Sept. 24 that the microblogging service was close to securing $100 million in funding that valued the company at $1 billion, flurries of 140-character jeers flooded the service. “Nutty valuation,” wrote @Nicklippis. “I’ve seen this movie before,” twittered @ericclovesbacon. “It starred eToys.com and ended in fail.”

True, a billion dollars for a company with virtually no revenue recalls the excesses of the dot-com era. The logic behind Twitter’s valuation comes straight from the very same school. It views Twitter less as a single company than as the base for a whole realm of communication and data. “It is an increasingly important platform for business and consumers,” says Seth Levine, managing director of Foundry Group.

Read the rest of the story here.

Correction to Mint.com Story; Shout-out to Felicis Ventures

I made a boo-boo on the recent Mint.com I wrote for BW. Turns out that Baseline Ventures did not invest in Mint.com. Ron Conway personally invested in the company as he was forming Baseline. However, Conway is no longer part of Baseline, Conway tells me via email. Over the summer, he started a sister investment firm called SV Angel LLC.

Credit to Aydin Senkut of Felicis Ventures for pointing out the error. Senkut says the organizer of STIRR, the networking event for entrepreneurs where Mint.com founder Aaron Patzer met First Round Capital co-founder Josh Kopelman, also referred Senkut to the deal after Senkut introduced Patzer to Conway and Paul Buchheit.

Buchheit is a rising star in the Valley, having coded Gmail as the 23rd employee of Google, coining Google’s “Don’t be evil” motto, and then co-founding social network aggregator FriendFeed, along with three other former Google employees. In August, Facebook acquired FriendFeed.

In other news, Senkut tells me that things are also going swimmingly well for this new firm. “Mint is my fifth exit in less than 4 years, allowing me to have a positive annualized IRR that’s right below the second highest in Cambridge Associates venture return study in 2008 (my firm was not included but it’s comparable),” writes Senkut. Way to go Aydin!

At Amazon, Marketing Is for Dummies

Here is a story I wrote in this week’s Top 100 Brands cover story about Amazon’s counter-intuitive and very effective branding strategy.

At Amazon, Marketing Is for Dummies
Instead of lavish ads, it invests in technology and distribution—and the results are startlingly effective
By Spencer E. Ante

The world’s best-known companies typically spend hundreds of millions of dollars a year on advertising and marketing to build their brands.

Not Amazon.com. The giant online retailer has created one of the world’s strongest brands by eschewing conventional tactics. Instead of shelling out big bucks for lavish trade shows and TV and magazine ads, Amazon pours money into technology for its Web site, distribution capability, and good deals on shipping. The result: a smooth shopping experience that burnishes the company name. “It is pretty unprecedented that their brand has ascended so quickly without a large marketing budget,” says Hayes Roth, chief marketing officer at brand consultant Landor Associates. “It’s not about splaying their logo everywhere. They are all about ease of use.”

Check out the rest of my BusinessWeek story here.

Venture-Backed Startups: A Growing and Increasingly Important Part of the U.S. Economy

Yesterday, the National Venture Capital Association published its fifth overview of the impact of companies backed by venture capital investment in the U.S. economy. The numbers are very interesting and provide data to support my theory that these high-growth startups are playing an increasingly important role in American business.

When I wrote Creative Capital, my book about the history of venture capital that was published last year, the 2007 NVCA survey that I cited found that as of the end of 2005 venture-backed companies accounted for 10 million jobs and nearly 17% of gross domestic product. The 2009 survey, which has data up to 2008, reports that venture-backed companies now account for 12 million jobs and 21% of GDP.

Click here to see the rest of the post on BusinessWeek’s TechBeat blog and a Scribd embed of the entire NVCA report.

Wicked Cool: Come See Me Speak in Boston Next Week

Next week, the Spencer Ante book tour is coming to Boston for three special events.

1. I have helped to organize a great panel on Sep. 23 from 6:30pm – 9:30pm being hosted by Financial Dynamics. The timely topic of the panel: What Will Drive the Next Wave of Growth?

Edward J. Reilly, Chief Executive Officer of FD Americas is the host, & Scott Kirsner, Innovation Economy Columnist at the Boston Globe will be moderating the panel at the Taj Hotel.

The panel will discuss the collaborative role of venture capital, start-ups, the legal community, and academia in innovation, job creation and entrepreneurship. Cocktails and appetizers will be served afterwards.

Scott Kirsner will moderate a distinguished panel of experts including:

* Spencer Ante, Associate Editor at BusinessWeek and author of Creative Capital: Georges Doriot and the Birth of Venture Capital
* Bob Davis, General Partner, Highland Capital Partners
* Ed Goldfinger, Chief Financial Officer, Zipcar
* Richard Bergin, PhD, Managing Director, FTI Consulting
* Andy Goldfarb, Executive Managing Director Co-Founder, Globespan Capital Partners

2. On Sep. 24, I am giving a talk at the former home of Georges Doriot, a drop-dead gorgeous Beacon Hill townhouse now owned by Jim and Cathy Stone. I am really excited about this talk as well since a lot of the Doriot friends and family will be in attendance. This is a private event.

3. Last stop is the morning of Sep. 25 at the Boston French Library, a wonderful institution created by Georges and Edna Doriot. This event is open to the public. I will be giving a talk about the legacy of Doriot and why he remains a very relevant figure for today’s turbulent times. Tickets are $20 for members, and $30 for non-members. Click here for more info on the event.

Mint.com: A Vindication of the Super-Angel VCs

Check out this follow-up story to the feature I wrote on super-angels back in May.

Mint.com: Nurtured by Super-Angel VCs
Intuit is acquiring a startup conceived by a “25-year-old kid” and funded by First Round Capital, a new breed of high-risk, early-stage venture capitalists

By Spencer E. Ante

Intuit’s purchase of Mint.com was a big win for Mint CEO Aaron Patzer and the rest of the 38-person staff he assembled to run the personal finance Web site. Yet the $170 million acquisition also vindicated a new breed of early-stage investor that is betting aggressively on startups while big-name venture capital firms conserve capital and shy away from risk. These so-called super angels are trying to reinvigorate venture capital by taking it back to its roots, when firms were smaller, nimbler, and more adept at helping to build companies from the ground up.

Mint.com owes much of its success to one such investor, First Round Capital, which opted to back the fledgling company at a time when other VCs demurred. Indeed, the Mint.com acquisition is First Round Capital’s largest exit, beating out the $100 million sale of portfolio company Powerset to Microsoft (MSFT). And although First Round Capital would not quantify the return on its investment, co-founder Josh Kopelman says the Mint.com deal generated the highest return of any deal the firm has done. Previously its best return came when eBay (EBAY) acquired StumbleUpon for $75 million, which generated more than 14 times First Round Capital’s original investment. “I don’t think this changes our strategy,” Kopelman says. “It is continued validation for our approach.”

Read the rest of my BusinessWeek story here.

Come See Me at the Google UC Berkeley Media Tech Summit

Apparently, Google does care about the future of news. The Internet search giant is co-hosting a Media Tech Summit at the Googlepex with the Graduate School of Journalism of the University of California at Berkeley from Sep. 29-Oct. 1.

The organizers have put together a great line-up of senior execs from the media and tech industries, including former News Corp COO Peter Chernin, Google’s Marissa Mayer, Apple expert Gene Munster of Piper Jaffray, Yahoo! Executive Vice President Hilary Schneider, investor John Thornton of Austin Ventures, and a lot of other top-notch folks.

I’ll be there moderating a panel on new business models at 10:15 am on Oct. 1. Panelists include:

Free to Premium – Marshall Van Alstyne, Professor of Economics, Boston University
Why Long Tail Won’t Work – Jeffrey Ulin, UC Berkeley Haas School of Business
The Models for Facebook and Twitter – Fred Vogelstein, Wired Magazine
Non-Profit Funding – Ellen Weiss, Vice President for News, NPR

First Thursday Recap: Lapham, Fish, Margolick, Frommer Rock the House

Big ups to my First Thursday co-hosts BusinessWeek’s Arik Hesseldahl and Lynn Parramore of New Deal 2.0 and RecessionWire. Last night, we resumed our monthly get-together at a new location near Union Square and had a fabulous time.

Dan Frommer and Jay Yarow from The Business Insider showed up early and yukked it up. Frommer reports that Business Insider is up to 20 people now but the mostly young men who staff the joint are crestfallen over their departure from the Gilt offices, which are stocked with pretty young things.

It was a pleasure to meet David Margolick, formerly of Vanity Fair and Portfolio, for the first time. Margolick reports that he recently joined Newsweek. It was also nice to see my felllow Berkeley alum Jeff Kearns, who arrived after closing a big stock market wrap-up for Bloomberg.

Speaking of Bloomberg, the financial services and information provider was the talk of the night after a story by the New York Post’s Keith Kelly reported late Thursday that Bloomberg was in the bidding for my employer BusinessWeek. The consensus among the 30 or so journalists who attended First Thursday was that it could make a great pairing.

Personally, I’ve always felt that Bloomberg and BusinessWeek made the best strategic fit of any merger partner. We can provide Bloomberg with a top-notch consumer brand and a stable of world-class journalists who can help Bloomberg raise their journalistic game. And Bloomberg could potentially be a great parent if they invest in the operation and bring their business and technology savvy to our enterprise.

The biggest and most pleasant surprise of the evening was when Lewis Lapham and Hamilton Fish arrived to have a few cocktails. Lapham, the legendary former editor of Harper’s magazine, showed up brandishing a copy of his new love, Lapham’s Quarterly. The idea is to set loose the world’s best writers, from today and the past, on a single topic. The current issue was a fine looking thick journal exploring the theme of medicine with articles from Barbara Ehrenreich and Hippocrates. Cool!

Hamilton Fish, the former publisher of The Nation who now runs the Nation Institute, had a smile on his face. He was stoked to report that Nation Books author and Institute fellow Max Blumenthal’s new book, Republican Gomorrah: Inside the Movement That Shattered the Party, was zooming up the best-seller lists. As for a few minutes ago, the book was No. 8 on the Amazon.com.

Congrats to Hamilton and Max.