I've been interested in the hyperlocal blogging movement since I started blogging. Once you have your own printing press, you start thinking about what you might write about the place you live. And I've written about school sports, little league heroics, contentious local issues, and a host of other hyperlocal news over the years.
My unwavering belief is that we will cover ourselves when it comes to local news. We are at the PTA meetings, the little league games, and the rallies to save our local institutions, so who better to cover them than us? This is what hyperlocal blogging is all about and it is slowly but surely it is gaining steam.
Today, our portfolio company Outside.in, which aggregates up all this hyperlocal blogging and makes it available and discoverable, announced a partnership with CNN which, among other things, means that hyperlocal bloggers will start seeing their posts on CNN. That's a big deal. This is the mainstreaming of hyperlocal blogging and its about time.
If you operate a local media business, big or small, and you want to add the voices of hyperlocal bloggers to your pages, then click here an learn more about Outside.in for Publishers and get started. If you are a blogger and want your stories on CNN and media partners like the New York Post and others, then make sure your feed is in Outside.in's index. You can do that here.
It's taken a long time for this vision to become a reality, but it's happening now. We are covering ourselves and big media is leveraging our voices to cover the local news that they can't get to. It is very gratifying to watch it happen.
For the past few months, I've been keeping two browsers open at the same time, Firefox and Chrome. I use Chrome for Gmail and other web apps where speed is of the essence. And I use Firefox because I still like having my extensions available to me. It's a pain in the ass to be honest. I'd really like to move entirely to Chrome, but I need my extensions.
Well this week is a big one because according to MG Siegler, Google is going to launch extensions for Chrome this week. It may happen at the Add-On Con which is happening the end of this week in Mountain View. Add-On Con was organized in part by our portfolio company Get Glue, which offers the Glue add-on, one of the browser extensions I can't live without.
Speaking of extensions I can't live without, here's my list:
Enemy Of The State is a mixtape which means it is a bunch of tracks that Lupe remixed and put out for free on the Internet. Artists who Lupe remixed on Enemy Of The State include Radiohead, Lil Wayne and Jay-Z.
I don't know what the economic relationship is between Lupe and all of these artists he remixed. Clearly that impacts the cost of putting out a mixtape. But the fact that a major recording artist like Lupe is putting out free music is pretty interesting to me. He plans to put out another mixtape called "Friend Of The People" later this month.
The last track on Enemy Of The State is called "HP Skit".
Give that track a listen and then watch this HP advertisement which features Lupe and others.
So Lupe included an HP advertisement on the Enemy Of The State mixtape. Let's say Enemy Of The State is downloaded a half million times. And let's say that the average downloader listens to the mixtape all the way through five times. Then that HP ad would be listened to 2.5 million times. At a $10 cpm (high but not crazy high), that would be worth $25,000 as an audio ad buy. If Lupe could put out one of these mixtapes a month, then that's $300,000 per year.
I was in a board meeting last week and one of the company founders made a very interesting assertion about the difference between old media and new media. He asserted that old media is about how much money you can charge each viewer. New media is about how many viewers you can get.
Now that's a gross oversimplification of his assertion, but the point is useful. The whole free mixtape movement is about getting as many listeners as possible, using existing music for the most part. The idea of monetizing it with lightweight advertising (nobody forces you to listen to HP Skit and it comes at the end) is very interesting to me.
It will be interesting to see if we get more of this kind of thing. I think we will.
Yesterday morning I attended the annual meeting of the NYC Partnership. The NYC Partnership is the "chamber of commerce" for NYC. Because NYC is one of the biggest commerce centers in the world, the NYC Partnership is a pretty interesting group and has lots of big name companies and execs involved in it.
My favorite talk was Larry Summers' in which he addressed the administration's economic plans, priorities, and strategies.
At one point, Larry said that the US needs to "save, invest, and export more and the developing world needs to spend, borrow, and import more" (or something like that). It's certainly true that we can't continue with the model where the US borrows and goes deeply in debt to purchase goods and services provided by the developing world which then saves the money they earn and lends it to the US. That's how we've gotten into the mess we are in.
But I'd like to focus on "saving and investing". It has not been fashionable in this country to be a saver and an investor. It's been more fashionable to be a borrower and spender. Everyone wants to lease a fancy car or take out a big mortgage to buy a big home.
I'd like to see Obama make a big deal about the value of saving and investing. He's got great oratorical skills but he often talks in grand sweeping generalisms, like the "need to change." Well I think its time to get more specific about what needs to change. And if Obama were to start talking about the value of saving and investing every time he makes a speech, I think he could make saving and investing fashionable.
Saving is hard, particularly when you can barely make ends meet. But a "forced savings" plan can work for most people. Many companies do an automatic deduction for a 401k plan. It would be great if you could also do an automatic deduction and send the money to a mutual fund or money market fund. If everyone tried to save 5 to 10 percent of their take home pay, it would make a huge difference.
Investing is also important. Not gambling, not speculating. That is best left to the pros. Investing means taking some risk but not a lot of risk. It means putting money to work in the economy, and not just our economy, but the global economy. Mutual funds are a good way to do this. So are index funds. There are a lot of good places to get sound advice on how to invest wisely and patiently. We need to do more of that in this country.
Saving and investing has been part of the american culture in the past. It is still very much part of the culture among some parts of our citizenship. But too many of us have gone on a borrow and spending binge and it's time to get back to basics. And I'd like to see our President get out in front on this issue and lead the country back to a better way.
When most people think of the HR acquisition, they think of a big public company, like Google or Yahoo!, picking up a small team of engineers and product people for a few million dollars of their stock.
But it might surprise you to know that the HR acquisition is alive and well in startup land as well. I just counted and over a quarter of our active portfolio companies have done or are doing HR acquisitions.
Some well known ones in our portfolio are;
- the Twitter acquisition of Summize which brought the company a number of really solid engineers, a leader for the engineering team, and search engineering talent.
- the Zynga acquisition of MyMiniLife which brought the company key members of the Farmville team who created one of Zynga's blockbuster games.
Most of the time HR acquisitions are done for engineering and product talent, as these two were, but I've also seen HR acquisitions of sales talent. Last year our portfolio company Targetspot acquired Ronning Lipset Radio which brought it the leading sales team in the online radio industry.
Building startups is hard and requires the very best talent. You can recruit that talent and that is certainly the way most of it comes into our companies. But in certain situations, you can also acquire the talent and for the most part our companies have had great success with HR acquisitions.
When you do a HR acquisition, you are going to pay a premium over what the team would cost if you hired them. And sometimes that premium can be significant. Here's how I like to think about it:
1) figure out how much equity in options it would cost you to hire the team
2) figure out how much of a premium over that number you will pay to get them in one fell swoop, a pre-built team that has shown it can work well together. I've seen premiums of 100% and I've even seen a few that are higher than that.
3) value that equity at what your company would be able to sell for right now
4) pay off the investors in the company in cash if you can
5) make the stock you are paying the team vest over the same period that your employees stock vests
6) no matter what you do, you must make sure the team is incented to stay for a three or four year period. if you can't do that, you shouldn't do the deal.
Here's an example. Let's say your company is worth $100mm. You've identified a team that can build or has built a technology that is on your roadmap and you don't have the skills on your team to build. Let's say that it would cost you 2.5% of your company to hire a team like that. Then you ought to be able to get comfortable with paying up to 5% of your company to buy the company and get the team. That acquisition is worth $5m on paper. Let's say the team you want owns 70% of their company and angels own the rest. Then here's the deal I would offer:
- a $5mm acquisition offer
- $1.5mm in cash for the angels
- 3.5% of the company in four year options for the team
Usually, you'll have to throw in some cash and accelerate some of the equity for the founders who are coming with the deal but keep that as low as possible. Make sure most of the value going to the team is in equity that they have to earn over time.
But most of all, make sure the team will be a strong cultural fit in your company. Make sure you'll enjoy working with them and they will enjoy working for you. And make sure that they are integrated into the company in a way that will allow them to succeed. The reasons most HR acquisitions fail is the team that is acquired leaves because they don't enjoy working in the company or are not well integrated and are frustrated.
I expect we'll see more and more of these deals in the coming years as some companies break out and become big successes and others struggle and decide to get "tucked into" the winners. It makes sense for everyone.
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