Monthly Archives

October 2010

Twitter Weekly Updates for 2010-10-31

By | Weekly Twitter digest | No Comments
  • Twitter Weekly Updates for 2010-10-24 #
  • Twitter Weekly Updates for 2010-10-24 #
  • Planning a day trip here in Majorca. Much of this island is still not really on the web. #
  • Drinking in Abaco, Palma Majorca again. Gotta love this crazy place #
  • Interesting piece on Apple's hardware choices and how mobile is the driving force for innovation #
  • UK govt small business assistance data 2008/9 & 2009/10 – Capital for Enterprise supported 170 buinseeses 2009-10 #

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Twitter Weekly Updates for 2010-10-24

By | Weekly Twitter digest | 4 Comments

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AIM often proves an unsuitable catalyst for the unready

By | Exits, Startup general interest | One Comment

image There isn’t as much talk as there used to be about AIM (London’s junior stock market) which is a shame. Entrepreneurs and their employees and investors need liquidity and a secondary stock market can and should be a good vehicle for servicing their requirements when they have small to mid-size companies.

Not for companies that are too small though – and therein lies the point of this post, which I started writing after reading an article in the FT whose headline I took as my title – AIM can prove an unsuitable catalyst for the unready. Being a blogger rather than a journalist I changed it though, to be a little stronger, because in my experience for every runaway success on AIM like Abcam there are tens of companies that get stuck. (For those that don’t know, Abcam has been a runaway success since it’s $15m listing in November 2005 and recently topped $1bn in value.)

These unfortunate companies find themselves with unhelpful disclosure requirements, significant ongoing costs associated with being publicly listed (anyone know what these are, on average?), and more importantly a shareholder base that doesn’t understand their company and a set of listing rules that often make it difficult to go private or take other radical action.

The FT article was written in response to a PwC survey which concluded that many of the dozens of companies which left AIM last year ‘may not have been suitable, or at least ready for an IPO’. In other words, they would have been better off staying private for longer.

Their alternatives would have been (and, in case anyone hasn’t noticed, I have a clear self interest here) to raise venture capital, raise some other form of private money, or fund growth through profits. I appreciate that none of these routes are easy, and not all of them will be accessible or appropriate for every company, but as the PwC survey makes clear, just because money is available on AIM it isn’t necessarily wise to take it. That said, venture capital is no panacea either, but the restrictions it comes with are less onerous than those that come with a public listing.

So when should companies go to AIM?

I think the answer to that question has two parts:

  1. Value – for a listing to be successful a company should have a large enough market cap and free float that fund managers will be able to take reasonably substantial positions without owning too much of the company, that there is liquidity in the stock, and that analysts want to cover it.  A £100m market cap is a good rule of thumb for ‘large enough’.
  2. Predictability – consistent performance is critical for public shareholders who generally speaking aren’t in a position to get to know their investments well enough to understand whether bad periods are blips or indicative of deeper malaise.  Unfortunately, most small companies have small numbers of customers and volatile revenues and/or are dependent on one or two partners who may themselves catch a cold – businesses with these characteristics or which are unpredictable for other reasons should think twice before listing.

To close I want to explain that I have concentrated on AIM as a vehicle for finding new shareholders and raising capital to fund growth rather than for providing an exit for existing shareholders because in my experience that is what AIM is mostly about.  That is different from a full listing where secondary components are much more common at the point of IPO and greater liquidity also allows shareholders to sell shares more easily post IPO.

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M&A deal terms

By | Exits | No Comments

If you are negotiating an exit and wondering what market terms are then you should check out this survey from SRS.  In contrast to Sarah Lacy who saw this as bad news for low level exits (or in her words ‘flip advocates’) I don’t think there is much in here that is surprising or bad news for startups.

My summary of the key findings is:

  • You can expect a post closing adjustment for working capital, debt or cash – which is entirely reasonable (not that it wouldn’t be nice to negotiate it away)
  • Earnouts are relatively rare – 25% of deals, and when they come revenues or milestones are the usual triggers – I’m not a big fan of earnouts – they are complicated to negotiate, hard to police, and don’t payout that often (a banker friend of mine says 50% is a good rule of thumb)
  • The period in which the acquirer can make claims under the reps and warranties is rarely longer than eighteen months
  • Escrow holdbacks are rarely more than 15%

If you read the survey you will see that SRS’s summary is a little different. Maybe their’s is designed to shock a little.

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How large indigenous tech companies help the ecosystem

By | Startup general interest | No Comments

You may have seen the graphic below on Techcrunch a week or so back.  It is a little clunky to use, but I put it up here anyway because it shows so clearly the large number of startups that Yahoo has spawned.  You only get this kind of boost to the ecosystem from companies that are a) very large, and b) were recently startups themselves. 

And the benefits aren’t limited to the creation of companies.  I haven’t seen any stats, but I would posit that startups created by Yahoo alumni are more successful than average.  They should be, as they will enjoy greater access to angel money (Yahoo created a lot of wealth for employees), greater access to Yahoo for partnerships and market insight, and finally relationships with senior Yahoo execs will make them more likely to be acquired by Yahoo.

The conclusion is clear – having more large indigenous tech companies in UK and Europe will help our ecosystem immeasurably.  We already have companies like Autonomy, ARM, Skype and SAP which I don’t think is bad given the relative youth of the startup scene over here, but if we are serious about rivalling Silicon Valley over the next 10-20 years then we need to add to that list.

Startups Founded by Yahoo Alumni

The Facebook money machine – $1.5bn this year

By | Advertising, Facebook | No Comments

Monday Note has a post up today with some good information about Facebook. 

I put the first piece of news in the title, which is that they predict Facebook’s revenues will be $1.5bn this year – that is $3 per registered user, a metric that compares well with the handful of comparative data points I can think of from other social networks I know.

Secondly, this table of the most popular fan pages is interesting, both for the absolute numbers of fans some of these brands have accumulated and for the big difference between first and fifteenth places.


By now some of you are probably listening to a voice inside your head which is asking “surely the level of interaction is more important than the gross numbers of fans?” – and it is.  Monday Note has some interesting data on that as well – and the headline is that there is huge variation between the best and worst performers as measured by monthly interactions per thousand fans.  Looking at a same sector comparison, H&M is doing four times better with its 4.3m fans than Gap is with its 0.75m fans (and that ignores Victoria Secret whose product is perhaps uniquely suited to driving engagement).

These big disparities are a reminder that despite Facebook’s reputed $1.5bn revenues this market is in its infancy and as a result Facebook marketing is still more of an art than a science, and is practiced with widely varying amounts of success.

Finally, if you have ever wondered what information Facebook offers to advertisers so they can target their ads, then read this (again from Monday Note):

Facebook makes possible to combine precise parameters, ranging from location to company name and the precise timing of an ad with a high degree of precision (find the women above 40 who work for IBM, in northern New York state and deliver an ad every Friday between 18:00 and 22:00, for instance).

Advertisers buy targeted ads on Facebook through self serve system that apparently accounts for half of Facebook’s revenue.

The other news about Facebook today is that they have a privacy breach that exposes user information.  If these claims are substantiated and can’t be fixed then Facebook’s targeted advertising will be one of the first services in the firing line.

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Twitter Weekly Updates for 2010-10-17

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Rework by Jason Fried and David Heinemeier Hansson of 37Signals

By | Startup general interest | 7 Comments

image A couple of days ago I finished reading Rework by Jason Fried and David Heinemeier, the founders of 37Signals.  I’ve got to say I really enjoyed this book – it is a quick read and full of good practical advice for people running small companies, and more generally for people in business.  Rework has its detractors and I can see why – the tone is a little smug and the advice is rarely backed up with case studies or real world examples – but the important thing for me is that the advice is good, and I can put up with a bit of smugness from guys who have built a business as strong as 37Signals.  A lot of the advice is non-standard fare too, which is an added bonus.

This is the first book that I read on my iPad and iPhone.  I bought the Kindle version from Amazon and downloaded the book easily to the Kindle app on both platforms which then stay in sync with each other.  I read more on the iPad than the iPhone, but the iPhone was surprisingly satisfying to use and I love having a book to hand at all times without having to carry it around.  It is often much more satisfying to read for twenty minutes than to clear off the top part of your email inbox.

The other thing I like about reading on the Kindle apps is that you can electronically bookmark your favourite bits and return to them later to, say, put them in a blog post.  The four pieces of advice I like the most are:

  1. Build half a product, not a half-assed product – this advice is in keeping with the Eric Ries lean startup, minimum viable product meme that is so prevalent at the moment but makes the point another way, arguing that very often small is beautiful and that startups need focus.
  2. Say ‘no’ by default – it is easy to say ‘yes’ to another feature, another meeting with a potential partner etc. and often hard to cut off an opportunity by saying ‘no’ – but that is exactly what good entrepreneurs do.  As Jason and David say ‘soon the stack of things you’ve said yes to grows so tall you can’t even see the things you really should be doing’.  And don’t believe that ‘the customer is always right’ thing either – as Henry Ford said, if he’d only listened to his customers he would have built a faster horse.  Startups need to balance converting the world to their vision of the future with listening to customers.
  3. Out teach your competition – teaching your customers delivers real value and will create bonds you don’t get from traditional marketing and it is cheaper.  Additionally, it is often easier for small companies to teach than large companies who have to filter their external communications through lawyers and marketing execs.
  4. Decisions are temporary (and you should make them quickly) – couldn’t agree more with this one, speed and agility are two of the most powerful weapons any startup has and without decisive leadership both are nullified.  There is a balance to be struck between acting too quickly and thinking too much, but favouring speed over making sure all potential problems have been considered is the way to go for small companies.  Bad decisions can be reversed but time spent considering options can’t be reclaimed.
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Tech M&A trends are positive

By | Exits | 2 Comments

This chart from a recent GP Bullhound presentation augurs well for those of us working in/with technology startups.  It shows that the number of tech M&A deals has been steadily increasing since a low point in Q3 2009.  Note also that digital media exits have steadily increased throughout the period shown.

imageThis chart shows the number of transactions.  I haven’t seen information at this level of detail on the value of the deals, but the higher level data I have seen suggests value is on the same trend as volume.

In a later slide GP Bullhound identified the hot spots for M&A as digital content, online services and virtualisation.  Within digital media eCommerce and (social) gaming were the most important subsectors.

A checklist of distribution channels for startups

By | Startup general interest | 11 Comments


Back in September Jason Baptiste Co-Founder of Cloudmatic posted a list of sixteen distribution channels for startups.  Jason’s main point in writing the post was that nobody should rely too much on any one channel for customer acquisition because having a broad base of channels makes your startup resilient to changes from any one partner whereas dependency opens you up to problems if they change strategy or get tough with you in negotiations.

That is a great point, and one I’ve made here before.

But I think the list is also useful as checklist.  All startups should go through each item and ask “am I devoting the right amount of time/effort/resource to this channel?”. 

There is more detail on each of these in Jason’s post for those that are interested, but I like to keep posts here nice and snappy.

  1. Public relations
  2. Organic search traffic
  3. Content marketing
  4. Affiliate programmes
  5. Lead gen programs
  6. Events and conferences
  7. 3rd party social platforms
  8. Social media marketing
  9. Mobile platform distribution
  10. APIs
  11. Paid online advertising
  12. Direct sales
  13. Business development
  14. Referral programes
  15. Traditional media
  16. New products and add-ons to existing customers

If you can think of any more please let me know in the comments.

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