GigaOM

David Selinger

Anticipating that a financial crisis like the one we’re currently experiencing wasn’t far away, I’ve run my company, richrelevance, on a zero-fat budget, raising small rounds of capital to ensure our team built the discipline to operate with small budgets. Yet, anticipation of the downturn does not make me immune to the shift. External risks in every business have changed. None of us will go through the next 18 months without significant impact.

But many entrepreneurs who saw the now-famous “Sequoia deck” unfortunately took its conclusions to be a tenet of truth and acted on it — perhaps too hastily. The folks at Sequoia are smart, but they aren’t necessarily smarter than you or me at running our businesses. This is the crux of the issue: While this market shift is, in fact, a 5- or 6-sigma event, what we do with that information is still within our domain.

Reacting blindly to a situation is wrong — being reactive is bad for your business. There’s a process to responding to urgent situations, much like triage in a hospital, and by understanding, analyzing, acting and repeating we can surmount these challenges. Now is a unique time when you can deepen customer relationships by advising them, seeking input, sharing ideas, etc. Below are four steps to responding the current economic situation without being reactive.

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Abigail Johnson

Over the last few weeks, we have all heard admonitions to startups (and all companies) to tighten their belts, be realistic about their businesses and hunker down for the long term. This is certainly good advice (in this market, and probably most of the time). But a few other things should also be stressed: He who wins in a down market wins. Some people will cede ground. Be prepared, tactically and strategically, to grab it. Because major changes are happening in the market today, truly transformative companies will be able to gain a significant foothold.

In any market, but especially in a tough market like this one, communicating aggressively is key. You want to keep all of your constituencies informed about what’s happening and how you are progressing. I know that you are probably wondering how you can both extend your runway and maintain or even increase your communications. This is not an easy formula, and every company needs to treat the question differently. However, here are a few guidelines: Continue »

We hosted the second NewTeeVee Live conference yesterday, and by all metrics it was a successful event. Despite the economic climate, we sold out the event that attracted some of the movers, shakers and of course creators from the world of online video. I wanted to take a moment and thank all the attendees, our sponsors (and there were many) and our speakers who rewarded us with their time and attention. The line up and editorial vision for the conference came from Liz Gannes and Chris Albrecht who work tirelessly to make NewTeeVee a must read.

The awesome community is one of the reasons why we have been able to evolve NewTeeVee with the online industry itself. Yesterday, I wrote about the opportunities and challenges facing the online video ecosystem. After a day of intense conversations and debates, I have some ideas which I am going to crystallize as a series of essays over next few days. As you might have guessed by now, we are all taking a much needed break today and through the weekend, but I had to get up and point out that this conference was a true team effort. You can catch up on the conference by going to NewTeeVee where all the blog posts and videos are available for your consumption. We will be adding more content over next few days.

Here are some video highlights of the conference:

• Keynote - Jason Kilar, CEO, Hulu
• Keynote - Reed Hastings, CEO, Netflix
• Keynote - Anthony E. Zuiker, Creator and Executive Producer, CSI: Franchise
• Fireside Chat - Alexis Rapo, VP, Digital Media, Disney-ABC Television Group
• Fireside Chat - Blake Krikorian, CEO, Sling Media and his Red Carpet Interview
• Mininote - Tania Yuki, Senior Product Manager, comScore

iPhone apps might some day be the gold mine for advertising.  In the meanwhile, we are seeing the emergence of a new trend: iPhone apps as ads. Hollywood studios are the first ones to react and using free applications to promote its movies. We are totally loving the new app for the latest Bond flick, Quantum of Solace. More than just a micro-site, the Bond application lets you watch the movie trailers and read up about the movie. It also pushes you out to the iTunes music store if you want to you want to purchase Jack White’s throbbing theme song from the film. Of course others have more immersive apps. 

The Dark Knight, for example has come up with a way to add some Joker-style graffiti to photos of your friends. Use the touch screen to drag and rotate elements and then save and send them as you like. Bolt, Disney’s forthcoming animated canine adventure has released an app which is essentially a free stripped down Super Monkey game for a very subtle hand.

All three apps, however, lack the seemingly most obvious feature - the ability to actually purchase tickets for the movie. That much imagination would be too much to ask from Hollywood, but we are happy that they are thinking about ways to promote their movies on screens that matter.

Updated: Adeo Ressi, the serial entrepreneur behind the venture-capital rating site TheFunded, has been getting a lot of attention for a presentation he gave at Harvard Business School in which he argued that the VC industry is “broken.” His central point is that there are simply too many venture capital funds chasing too few opportunities, with unrealistic expectations. The result, as he notes in one eye-grabbing slide, is that VC returns over the past five years have fallen below the total amount of money invested over that same time period.

It’s certainly the kind of slide that makes you sit up and take notice. But is it evidence that the VC game is kaput? Hardly. Continue »

This week’s $250 million funding for vacation home rental listing company HomeAway Inc. was the largest web-related venture capital investment since the bubble days at the turn of the millennium. But it also contained a provision that signals how the lack of venture exits may be causing some entrepreneurs to ask for cash now, rather than waiting for an initial public offering or sale that may never come.

As part of the HomeAway financing, a portion of the money will go toward repurchasing some of the shares held by employees and early investors in the Austin, Texas-based company. CEO Brian Sharples wouldn’t disclose how much money, or what percentage of shares, affected employees would be able to exchange for cash, but traditionally such deals are fairly rare. However, in the last few months I’ve talked to a growing number of entrepreneurs who have negotiated such deals. The fact that they’re becoming more common, especially in younger companies, shows how for some, the economic downturn is spurring a lack of faith in the venture model.

That model is one that rewards entrepreneurs and investors for building up a solid business over a 5- to 10-year period, then selling it, either to the public through a stock offering, or to an acquirer for a sum that makes those years of work worthwhile. It’s the American dream, Silicon Valley-style. But what if entrepreneurs aren’t willing to wait that long? And what if the exit markets aren’t open?

As deals like HomeAway’s show, that’s precisely the environment we’re in now. When a venture-backed company does such a deal it’s generally because employees who have taken a lot of equity in it want to exchange that equity for cash. Usually equity holders get cash after a company exits, via either an IPO, merger or acquisition. With the IPO window shut (so far the total number of IPOs are down by 81 percent this year), and M&A slowing, that’s looking less likely.

Sharples explained the decision to offer shareholders the ability to cash out as a reward for the work employees have put in. The company had planned to go public in 2008, but given the appetite for IPOs, have shelved the idea for at least two more years. This would disappoint any shareholder, but HomeAway is only three years old. For early investors or founders to expect an exit in three years is ridiculous. Other than back in the bubble years, most venture-backed startups don’t achieve an exit for seven years, and in some cases, such as with clean technology, investors are looking at 10 years before a payday.

HomeAway is more of a private equity business model (the company is buying up Internet properties that list vacation homes available for rent in the U.S. and potentially worldwide cities), so perhaps that explains the short time to a planned exit. But HomeAway isn’t alone. Facebook has allowed its early employees and shareholders to sell some of their shares for cash, despite being only four years old. Digg, the news ranking and aggregation service founded by Jay Adelson and Kevin Rose, raised $28.7 million in September, a deal that rumored to have involved Rose taking some cash.

It’s a win when employees can cash out, especially in such dismal times, but raising money in order to buy back shares has the potential to set a lower fair market value for the startup, as well as to dilute the value of shares held by existing shareholders. These sorts of deals are a sign of stress in the venture model, and we’re likely to see more of them if it remains difficult to take a company public in the coming year.

This article also appeared on Businessweek.com.