Saturday, November 22, 2008

The Great Debtpression

This blog is normally reserved strictly for my business strategy and marketing ideas for startups,entrepreneurs and VC's. I think that what the government is doing right now however (destroying capitalism as we know it) is horribly flawed, and important enough that I want to share my ideas on what they need to do now!

I originally alluded to my idea on Stocktwits (Created by Soren Macbeth and Howard Lindzon). Since all the bigwigs in Government, On Wall St, and at the Fed read Stocktwits, I am certain they saw my idea earlier. For those not familiar, Stocktwits is the first vertical on Twitter to be wrapped up and aggregated. It allows you to view and share ideas, and investment strategy along with some of the smartest investors out there. If you have not seen or tried Stocktwits yet, I suggest you do. Even if you do not have an interest in stocks, it should give you entrepreneurial types ideas on just what you can do on the Twitter platform, and what you can build for just a few pennies.

OK now to the meat of this post. See the graph above? What you are looking at is the DJI during the 1929 Crash and subsequent "Great Depression" overlayed with a graph of the NASDAQ starting from the 90's bubble and subsequently the current "Great Deptpression".

The experts will all point to how it is much different today, because we have learned from out lessons of the past (after the 1929 crash government tightened up credit). I say BULLSHIT, it is exactly the same, and the overlayed charts echo that sentiment.

While the Government IS doing things differently in reacting to this crisis, it is still doing it wrong. The Fed is pumping BILLIONS of liquidity into the markets. The Fed is (will) spend over (at least) one TRILLION dollars on recapitalizing the banking system before this is all said and done. This is KEY to the failure. Even in the face of all this money, we are watching the Banking system as we know it fall into the abyss one by one. While I recognize that the over 80,000 banks in the US is too many - Letting them all fail in this manner is just bad for everyone.

Without our banking infrastructure, there can be no economy. Let me state that again NO BANKS = SOUP KITCHENS AND FOOD LINES!

The reason that TARP and the recapitalization (socialazation) of our banking system is a failure is a result of their recent capital structures. Banks have (had) been leveraged and allowed to loan against there asset base way in excess of their capital base. That worked fine until the FASB changed the rules and instituted "Mark to Market", and underlying assets plummeted in value "the perfect storm".

For those who might not know, this is how it works. Banks are required to have a certain percentage of assets in relation to the amount of money they loan. Mark to Market requires a bank to carry those assets on their books at their CURRENT value. For the purpose of this post, look at a typical asset as someone's house. Let's assume that the bank made a loan for someone to buy this home a few years ago, and lent $500,000. Now, that same home is only worth $400,000. So that $500k asset on the bank's books needs to now be written down to "market value" - or $400k. As banks write down all of those underlying assets to reflect the current downturn in the housing market - they fall below capital requirements and technically become insolvent.

On top of the dozens of large banks that have already failed as a result, Citibank (once the worlds largest bank) is trading as a pennie stock ($3 per share). Though a Citibank failure by itself will not bring down the entire banking system, it is just the latest one to do so. The stock market as a result can and will do NOTHING but go down, as long as the ailing financials keep failing.

The government needs to immediately STOP the TARP and bailout. Even if this was effective (it is not), they are simply printing more money = Dangerous implications for the value of our currency (US Dollar), and the inflationary pressure that will ultimately result.

What the government can and SHOULD do is change/remove the "Mark to Market" rule that is currently in place. When I pose this idea to friends, they all suggest that somehow this is simply pushing the problem out to the future. To which I say RUBBISH!

Let's revisit our earlier example of a bank that lent out on a $500k asset now worth only $400k. Yes, we have been in a housing bubble, and yes the values can decline even further but hey - What do you think that home will be worth at the maturity of the loan (30 years)? You would be hard pressed to find anyone who thought that it would not be worth AT LEAST $500k, if not more.

So Government get rid of Mark to Market, and let the banks Mark to Maturity. Any bank marking to maturity should subsequently be required to hold that underlying asset until either it is sold at par, or till it's maturity.

This action will allow banks to recapitalize organically, and without further socialising our banking system and most importantly without printing Trillions of new dollars in the process.

How would you fix the banking system? Please leave your comment.

Do you agree with the logic of my argument, if you do please consider DIGGING it.

You can follow and be followed on Twitter here.

Wednesday, November 19, 2008


Help stop the Great Debtpression! Tell Congress to stop pissing away our money!!

Here are 6 important suggestions for congress.

1) Let Gov't fund mortgages DIRECT, banks only service them. It should be Every one's right to own (afford) a home.

2) Let banks fund OTHER things ie- Solar in the home is affordable if amortized over 30 years = new revenue stream for banks

3) Give EVERYONE (not just troubled loans) a haircut on their mortgages. Average it out dutch auction for example, if it is determined that banks need to write down 60% of loan value = 60% less owed on mortgage for every current homeowner

4) Reverse TARP, and bailout., and let the weak banks fail but not before removing "mark to market"...should always have been "mark to hold date" Which means, if a bank commits to holding a loan till maturity then it is "mark to maturity" = TRUE mark to market

5)Gov't going forward should also have an equity stake (kicker) for ANYTHING it funds ...this reduces the burden on our children. A little bit of socialism is NOT bad.

6) No money for automakers unless shareholders get wiped out first. Gov't money MUST be senior.

Leave YOUR comments what would you have Government do differently?

Do you agree with this post? Then please DIGG it and let's let congress know they are WRONG.

Want to debate this further, you can find me here on Twitter.

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Tuesday, November 11, 2008

Your VC 's Hidden Value

As someone who has worked with numerous startups, founded a few, and written many business plans I follow the VC community. Most that I have ever met, talked with or corresponded with have always remained behind closed doors. For some entrepreneurs these VC's are fine. For others though you need to look beyond the term sheet to find the hidden value some VC's can add.

While writing this post, Fred Wilson of Union Square Ventures comes to mind. He is the perfect example of how I define "hidden value". Fred is "out there". Recently named the #1 man in New York tech, He Tweets on Twitter (one of his Union Square investments). He uses Disqus (another Union Square Investment) for people to leave comments (and have an extended conversation) on his AVC blog. He tags all his blog posts with yet another Union Square Venture investment, Zemanta. I am certain he uses ALL of his venture portfolio in similar fashion.

Fred Wilson has become not only a showcase but an eco-system for his investments. His very popular AVC blog is read by approximately 120k people per month. As someone who is a frequent visitor to Fred's blog, I myself find myself using most of his portfolio's tools/services. I saw how effective, and useful they were for why not for me?

If you have ever launched a startup, you know just how hard, and how important it is to attract your early-adopters. This is usually the costliest(Marketing) part of your launch. Having a VC (or any investor) who can add "FredWilson" value (likely 10's of thousands if not 100k users) has found the hidden value not written in any term sheet.

What value does your VC (or if you're a VC) add? Please leave YOUR comments. If you think others might learn from this post, please DIGG it.

You can have a chat with me here on Twitter.

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Monday, November 10, 2008

Mashups NEW Content is King

I (like many) always like to see the "Next big Thing" early. I believe that for Media (content producers) the next big thing will be Content Mashups.

We are already starting to see it *trickling* in. The New York Times recently introduced "Times People " allowing its readers to mashup the content of original New York Times articles. Want to write a book with others? Try a service like WeBooks which allows you to co-author books with others.

I believe that this trend is only in its infancy, and we will watch it unfold into mainstream media projects as well. We will work WITH Hollywood in determining how a movie unfolds. We (collaboratively) will write the script, they will produce it.

I have been working on writing a business plan called 9thTrack would allow any professional musician (or label) to submit their original songs. Their fans would then alter the songs to their liking (Want to remove a piano solo? Perhaps you want to add a harmonica or your cool guitar riff?). Once altered it would be sent to that bands "staging" area, where the best versions would then be vetted. Top vetted versions would then be made available for sale.

Now, instead of having the Internet only pirate their sales of CD's, they actually have NEW revenue streams.

EVERYTHING will be mashed up! If you are interested in Mashing up the 9thTrack business plan, feel free to reach out to me and we can collaborate on that too! Oh ya, people are already mashing up business plans too -

Please leave your comments on what you see as the next big thing in content, or if you just liked this post, please consider Digging it.

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Wednesday, November 05, 2008

Business Development for Startups

Business Development is not some role where you hire someone to sell ad space or whatever on for your startup. So HR people take note, I can not stress this enough. Your Director of Business Development job, or VP of Business Development job is NOT the same role as a Sales Job.

The role of a Director of Business Development , or Vice President of Business Development is a strategic role. Your Business Development executive needs to be able to accomplish these core objectives:

1) Identify the different channels for their business development activities.

For example, when I headed up Business Development for RoboForm my business development encompassed different strategic partners, and different business channels. There were distribution business development deals (Bundling RoboForm's Freemium software on Sandisks flashdrives as one example). Getting a paid search deal to include Yahoo's paid search results in RoboForm's toolbar is another - and importantly different business development channel. There were (and are for you) many different Business Development Channels.

2) Identify who the *Key* players are in these repspective business development channels.

3) Structure how to best approach the deal (what's in the deal for me, and what's in it for my partner <--- You MUST read THIS post on Negotiation if you not already).

4) Close the deal.

Now all of this is likely straight forward, so what is the point of this post on Business Development? The point is that Business Development and the role of your Business Development executive is MISSION CRITICAL to not only your business, but more importantly the business plan itself!

When you decide what features you want to have on your cool new Web 2.0 social network, or your new *wizbang* software - consider leaving some out! "Huh? WTF did he just suggest?!" Yup, leave it out. This might give you the added oppertunity to structure partnerships for the missing feature. By NOT building/adding this internally or organically you have just opened the door for a strategic partner to bring you new users, or more importantly a revenue stream!

I will offer one example of this just in case my (rambling) point is not clear. When I was doing Business Development for RoboForm (a browser toolbar password manager), I closed distribution deals with the majority of browser vendors (think IE,Maxthon,Firefox, Avant as examples).

Looking at Avant for this example, they did not have their own Password manager built in to the browser, and instead offered their users a Freemium version of RoboForm. This ultimatly provided Avant with a seven figure revenue stream. Considering that there are not many obvious ways to monetize a free product such as a browser this is not a tiny sum of money.

After I left RoboForm Avant subsequently built (and added to Avant) their own Password manager. Want to guess what happened to Avant's revenue stream once they built it themselves...?

On this blog I give away my intellectual property, but the cost is not free. If you liked or learned from this post, please leave YOUR comments. If you do not have anything to add but still found value, please Digg it, Stumble it or just Tweet about it.

So that I can follow and learn from you on , reach out to me on Twitter here. Lastly, apologies for all the "Business Development" type google juice :-)

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Tuesday, November 04, 2008

Brands on Twitter

"I'll take that coffee to go"... Why not take Twitter "to go"?

Twitter (in spite of itself) has started to attract some brands to it's micro-blogging service. Most of these brands are using it to interact with their customers in real time. They also (correctly) use it to give their brands a personality (putting the human element into their brand/marketing). This form of marketing/customer service on Twitter just makes sense. Especially for the early adopters, who will receive free notable press and kudos as a result. This is the first generation of Twitter for biz.

Even though Twitter 1.0 for biz is still in its infancy, I believe we will start to see brands using Twitter 2.0 - as more become aware of its powerful reach. Unlike brands on Twitter (Comcastcares, DunkinDonuts,Starbucks) who go to Twitter for their interactions we will see a new form of Twitter usage by brands, where they bring the Twitter experience in house.

In a recent blog post, we discussed how one method for Twitter to monetize was a business development deal with Twitter has "Tweetups" now, however they are informal, and organically organized.

If you own a brand why not invite Twitter (and their millions of users) over for dinner? Dunkin Donuts just as one example could arrange "Tweetups" at the local level. Now, instead of waiting for a customer to come in for a cup of coffee, they are inviting Tweeple to come by and join other like Tweeple for a social experience. A social experience that will sell coffee, and donuts.

Even if you are not a large brand with national/international exposure there is still always a way to make this work for you. Do you own a bar, or a local pub? Why not organize Tweetups at your place? Offer a free beer, or perhaps organize your Tweetups arround an 'experience' (how about a Tweetup at your pub for people to play Guitar Hero?).

Just because Twitter is a social network, it does not mean you can only leverage it's strength at Think outside the box, and think about taking your "Twitter to Go".

How do you envision brands using Twitter in the future?