Thoughts on the StockTwits Deal

Full disclosure:  I’m not a user of stocktwits and spend very little of my personal energy thinking about stocks.  I do spend a considerable time with twiiter and even more time with some of stocktwit’s investors.  I think about startups quite a bit.

Stocktwits is interesting to me because they put together a Series A financing (I have to believe this means low seven figures, but I don’t know and haven’t asked) lead by IA Capital which is Roger Ehrenberg’s name for his personal investments.  Because Roger “lead” the deal (he was a previous investor) he built a large and diverse syndicate of Wall Street oriented professionals and Internet folks.  Roger lists 11 different investors on his post and apparently this list was not exhaustive.  Only 5 years ago, Series A meant professional venture investing and was primarily limited to two firms.  If I’m Soren and Howard ( I do not know either) , I would much rather have a group of individual wall street types that are actively tweeting and contributing to the community than virtually any venture firm in the world.  Seriously would Sequoia be better for Soren than the list of investors in Roger’s syndicate?

Unfortunately, most companies in StockTwits space don’t have the choice because the angel market has rarely been able to reliably organize itself into a syndicate that can do seven figure transactions.  But if they are able to do so by using professionals like Roger won’t this create competitive pressure on the venture business?  I would rather have Limited Partners than General Partners when the limiteds have so much industry expertise and industry clout.  Given an equal investment of time Is Michael Moritz or Michael Parehk better for StockTwits?

Perhaps people wrote about this theme during the week, but I didn’t see it.  Well organized personal capital may make considerably more sense than institutionally managed venture capital.  Over time, this could be a big change for the venture industry.

Fred Wilson’s post casually explored this theme, but Paul Graham certainly gets it  in  his latest essay.


Republican Senators Have Courage

Fred Wilson beat me to a GM post that I wanted to write over the weekend.  If only I had watched less football.  Fred nails it so read his post, but here are my thoughts.   General Motors is a disaster and we send the wrong message to everybody in this country and around the world if we give the company money without demanding changes.  The republican senators stood up to the Bush, Obama, and Pelosi and said the legislation that was originally intended to “green” the auto industry should be used as a stop-gap to save GM for a few more months.  It’s discouraging that Bush has the ability to use TARP money to bailout GM, but not surprising that a President who has never paid attention to what anybody else thinks would just circumvent the system using poorly written legislation.  TARP was done to prevent a collapse of teh financial system not bailout any company that needs help during these savagely difficult times.

I recognize that GM employs lots of people, but we will face this problem every quarter in 2009 if we don’t make some changes.  Here is what the United States government must get if we are going to bailout GM.

1.  Goodbye  shareholders.  This is a pay to play situation.  If you don’t want to pay you can’t play and the United States and GM employees should be the only shareholders at GM.

2.  American Government picks up the the GM healthcare obligations for retired workers until healthcare legislation is passed that can replace it.  This would give GM a competitive chance at going forward and relieve huge expense burdens that have no impact on the company’s ability to make good cars.  This is expensive. Hopefully the rise in GM’s equity will help offset that.   We cannot abandon these workers’ healthcare needs.

3.  New Management.  We are all shareholders now and I don’t believe Rick Wagoner.   Find somebody else.

4.  UAW contract must be revised.  The union leadership postures because Pelosi, Obama, and even Bush look for ways to circumvent the Republican Senate.  Everybody needs to be on same page.   We can’t pay workers double what Toyota does and expect GM to compete.  Only the threat of Chapter 11 will bring the UAW in line.  Use the threat.

5.  GM board should meet monthly to review monthly objectives and see if the company is making progress.  Management should be under tremendous pressure to perform and be rewarded properly.  But make no mistake.  Working at GM should be the hardest job in America and every effort should be made to apply massive pressure on this mgmt team to deliver change in 2009

6.  Extract the appropriate commitment to greentech as a way of getting GM’s marketing muscle and scale behind environmental changes.

7.   Move GM out of Detroit.  This is radical, but I think would help.  Detroit is bad for the automobile industry.  It’s insular and suffering from years of failure  GM needs a rennaisance and the American car industry does not all need to be in the same city.  If people don’t want to move, don’t move and find new people.  That would help GM.   Michigan has good things going for it and they need to reinvent the economy.  I think GM moving to say Dallas or Atlanta or Los Angeles or even Chicago would help them find new people, new ideas, and most importantly the pyschological will to start again.

“Yankees Sign Iraqi Hurler”

Andy Borowitz cranks out a classic this morning.  His email newsletter is among my favorites and certainly the best for a Monday morning.  Enjoy the laugh.

Thoughts on Tumblr’s Financing

Fred Wilson posted on AVC about why he feels Tumblr is a good investment and he went onto discuss the current market for investing.  I decided to comment because historically same investor funding for a series B round has meant that the company may have been unable to attract outside funding somewhere else.  Typically, Series B finds a new investor to set price with A investors following on.  While this is not always true (Sequoia kept investing in YouTube), industry veterans do tend to wonder about valuation and terms when say USV and Spark follow-on their own investment.   USV seems to operate a bit differently (they also reuped on but Spark lead Twitter’s last round (I think USV participated).

Was this a good deal?  I’m sure.  Tumblr needs time.  It’s really so new. I use it a bit.   I’m told by people close to it that the potential is enormous.  Just this week,’s CEO  Mike Hudack told me he thinks it has blockbuster potential.  I’m glad that Tumblr wants to charge for its service.  I hope this works and becomes a trend.  My comments on Fred’s blog are below.


Tumblr clearly has some meaningful traction, but as a longtime follower and participant in the industry I would say there is a frequent concern when the same venture firms invest from round to round. Most entrepreneurs have been trained to go find new venture participants to set a valuation. Frequently, current investors give that same advice. I’ve always felt it was an inflexible position because if I were a venture firm I would want to reup with strong portfolio companies for two reasons. First, I know the company better than most and have an advantage as a result of that and Second, money raising is enormously time consuming and distracting for growth companies like Tumblr. While I have not read all the publicity for this week’s announcment I did read Bijan’s post and yours and there was no real valuation or terms information. While this is not atypical, it does, rightly or wrongly, lead people to speculate in a way that’s different from say, Huffington Post, because that brought a new investor, Oak, to the table.

To me all of this is about the “rules of engagement” in which veteran participants have been trained. I’m not sure it makes sense for them to apply anymore, but without transparency on the part of investors/entrepreneurs it’s hard to know what’s really changing, if anything.

Originally posted as a comment by aarondelcohen on A VC using Disqus.

Why we Need Newspapers

I read some really dumb stuff in the newspapers today.  More than anything I’m bothered by the Wall Street Journal’s slouch towards the New York Post.  The WSJ’s big headline today is that Jesse Jackson might be a part of the Illinois political scandal.  It’s the entire above the fold article space.  Come on, how exactly how does this affect the corporate sector?  It doesn’t.  But Murdoch wanted a prize brand to influence American politics.  The downside is that we are losing one of the great private sector institutions in America and the newspaper that discovered the Enron crisis.  We need the vigilant WSJ. Meanwhile, they are taking their dwinding journalism resources and covering Illinois to combat the NYT liberal bias.  Yeah, that’s a good differentiation strategy Rupert.

So unfortunately, we turn to the paper that really typically covers poltical scandals for a superb distillation of the country’s economic crisis.  Check out Steve Pearlstein’s colunm in the Washington Post.  You may have to register.  It’s worth it.  He makes a great case for why Sam Zell, Robert Rubin, and other business leaders are hiding behind Perfect Storm excuses.  Without the Post and other papers, we will have fewer and fewer paid journalists who have time to write such thoughtful columns.  I tried to get at similar arguments in some of my blog posts, but most bloggers do not have the time to be as thoughtful.  While there are an increasing number of professional bloggers, newspapers play a vital role in our society and that’s why they have to figure out how to survive.

Thanks Steve Pearlstein and thanks to my mother, Carla Cohen, for turning me onto the piece.  I read a lot of newspapers, but typically I’m only on the Post site for Redskins news.

Sam Zell Hammered in Washington Post

Thanks to my old friend Betsy Befus Feigin, I’ve been forwarded this savage attack on Sam Zell on the    I’m disseminating the information because I want my readers to have it.  I want to think and read more about the Tribune situation before I publish anything myself.     There is no question leveraging employee pensions to raise debt to buy a company is ethically quesitonable.  Mgmt  gave employees stock when Zell bought company, but the stock is way behind the debt and now with bankruptcy will be wiped out along with Zell’s stock.  But the Tribune issues are nuanced and deserve and will get more scrutiny on YallaGuy.

Pray for Newspapers

The WSJ reports that Tribune has retained Lazard to help restructure its debt and that Tribune may seek Chapter 11 Protection.  A month ago I met Bruce Toll (Toll Brothers) at a cocktail party.  Toll is the Chairman of Philadelphia Media Holdings and had helped lead the deal to buy the Philadelphia newspapers from McClatchy.  He was very pessimistic about McClatchy’s ability to avoid bankruptcy proceedings and disclosed that Philadelphia Media itself was really in no position to continue meeting its debt obligations.

Meanwhile Henry Blodget continues to track the travails of the NYT and I encourage you to make sure you read his posts today and in the future

Whither These Friends

Whither These Friends

While the automobile industry commands most media attention these days, the rapid demise and potential reinvention of the newspaper business will likely be a huge story in 2009.  Major cities in America may find that the newspaper of record no longer exists or emerges from a restructuring with a far leaner news gathering organization.  At best, diversified newspaper companies such as the NYT, Hearst, Cox, Gannett, Tribune and others will have to sell off valauble assets to restructure the balance sheets.  Goodbye television stations and baseball teams.

The good news is that the Chapter 11 process or other debt restructurings could pave the way for new ownership and reduced debt service.   Plenty of debtholders will settle for 30 cents on the dollar to get something in what they perceive to be a  dying newspaper industry.  So new equity participants could get in inexpensively with significantly less debt on the balance sheet.

Here’s what’s interesting about this dynamic.  In some communities — Philadelphia, Minneapolis, and New Orleans to name a few — newspapers play a central role in people’s lives that takes years to establish.  Even young people in these communities appreciate the newspaper brands of these towns and that awareness could be utilized to grow a local business that is central to people’s lives.  These companies also have one of the few sales organizations capable of selling at the local level.  Citysearch wants that capability.  Yahoo has partnered with newspapers around the country because they couldn’t grow that same competency.  Local advertising remains remarkably untapped and newspaper companies still may be able to retain and nurture that business.

Interestingly, this bad economy might be the saving grace for the newspaper industry.  Debt holders want something and the need for restructuring may bring more innovation to the beleaguered category.   Recent history has been brutal.   Tribune has struggled in LA and Chicago.  The Philadelphia Inquirer,like so many others big dailies,  has been unable to stanch the bleeding subscriber base, and many of the big newspaper companies carry debt levels that required healthy classified and national advertising franchises to service.

The few times I’ve visited Detroit it’s felt  like dead city walking.  Old buildings, bored employees, little diversity, marginal passion. I’m sure I have not seen all that Detroit has to offer, but the car industry feels tired.  When I visit newspapers they may have much of the same physical architecture, but they crackle with energy.  They have experimented, they still want to win.  The car industry may not be able to find its way back in this brutally global marketplace.   But the newspaper industry can find their way.  Pray they do.  Bloggers need newspapers to help set the agenda so they can frame it.  People need newspapers to ensure that institutions private or public do not run completely amok.

Think the financial crisis is bad?  Imagine what it would be like if nobody was reporting on it.