Paul Wallbank – Brilliant Communications

Author: Paul Wallbank

  • Chasing the food delivery startup hype

    Chasing the food delivery startup hype

    Every few years the tech community goes through a mania for a type of business. Five years ago it was deal of the day sites led by Groupon where around the world copycats firms gleefully accepted the money of eager investors.

    Today it’s food delivery services and industry analysts CB Insights have mapped the investments of US Venture Capital firms in the sector.

    Recent years have shown that tech investors like to flock in packs and the current focus on delivery apps is just another example. So right now if you want to pick up some VC money, setup something that delivers food to people.

    If you’re lucky, the greater fool model might deliver a nice pay off as larger companies suffering from Fear Of Missing Out (FOMO) desperately grab some of the more higher profile players.

    Be quick though as the mania tends to dissipate quickly as the hundreds of Groupon copycats eventually discovered. When the hordes move on, they don’t leave much for those left behind.

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  • Internet adoption and wealth

    Internet adoption and wealth

    With 85 percent of Americans now online it’s safe to say the internet has reached saturation point in North America.

    However not all groups have been as quick to get online and the Pew Internet Survey has a detailed analysis of adoption rates across different demographic segments.

    The results aren’t particularly surprising with lower adoption rates reflecting class, race and education differences although older age groups are the fastest growing segment.

    Ultimately adoption comes down to affluence with the key chart being the connection rates across income groups.

    What the Pew report does illustrate is how critical the internet is to income levels and why it's important for the disadvantaged to be connected for them to participate in the new economy. For countries following affluent nations in internet adoption, getting disadvantaged communities connected might be one of the easiest ways they can improve national income, education and well being.

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  • Pushing back on the greater fool startup model

    Pushing back on the greater fool startup model

    One of the features of the current tech investment mania is the ‘greater fool’ business model of building a startup with the aim of flipping it to a larger company.

    That model is based upon gaining as much publicity and users as possible to justify a high price for further investme, a buy out or stock market listing.

    In that environment making money is irrelevant, in fact to many Silicon Valley investors a profitable startup is less attractive to one burning investors’ capital.

    Now New York’s top tech investor, Fred Wilson, says he’s sick of that model.

    But I’m a bit sick and tired of the objective of every operating plan I see is to get the business to a point where it can raise money at a much higher price. That’s nice and it’s how the VC/startup game is played. But at some point I’d prefer to see an operating plan that has the objective of getting to sustainable profitability. And I do mean sustainable.

    When the froth comes off the current investment market it will be the profitable businesses, or those with a prospect of making a return, with the best prospects of survival.

    Fred Wilson’s pint is a warning for the many of today’s investors; profits matter and startups need to be able to show how and where they are going to eventually a return.

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  • Shifting Microsoft’s culture

    Shifting Microsoft’s culture

    “What would be lost if we disappeared?” is the question Microsoft CEO Satya Nadella claims is driving the company’s direction in his latest memo to employees.

    In the email obtained by website Geekwire, Nadella told his staff redefining the company’s culture is key to success, “we can do magical things when we come together with a shared mission, clear strategy, and a culture that brings out the best in us individually and collectively.”

    That culture though is not static and Nadella is describes how the company needs to focus on helping its customers through its cloud and Windows based products.

    For Microsoft this is not new, the change from a desktop and server based licensing business to one dependent upon cloud subscription services has been a huge change for the business since the iPhone was released nearly a decade ago.

    The challenge for Nadella however is to keep revenues coming in as the river of gold that was Microsoft’s Windows licenses slowly dries up.

    One of the biggest changes to Microsoft’s culture could be in coming to terms that it isn’t such a huge and powerful corporation any more.

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  • Why are public companies becoming rare?

    Why are public companies becoming rare?

    The United States has only half the publicly listed companies of twenty years ago, writes Barry Ritholtz in Bloomberg View.

    While the Initial Public Offering still remains one way for startup businesses to release  wealth to founders and early investors, the number of mergers and acquisitions has seen the total number of public companies fall over the last two decades.

    Most of the fall has been due to existing companies being bought out through mergers and acquisitions while there have been fewer new businesses listing to replenish the stocks.

    Last year we interviewed Don Katz, the founder of talking book service Audible which was listed in 2000 and acquired by Amazon in 2008.

    Katz found the running of a listed company was onerous and more value, and investment funds, was added by being part of a larger organisation.

    The view of Katz and Audible’s shareholders that there is better access to markets and capital through larger companies probably drives much of the enthusiasm for M&As along with serving to increase the economic concentration of large corporations.

    Ritzholtz speculates another reason could be the deepening pools of private equity and venture capital which mean newer businesses don’t have to rush into a listing to raise funds or give founders and early investors an exit.

    Another reason could be that companies have become more profitable with US corporations being more profitable than any time since before the 1929 stock crash. More money coming in means it’s easier to fund the business using cash flow and investors can make a good return on dividends rather than share sales.

    The cost of money could also be affecting listings, with debt so cheap companies can raise bonds cost effectively without diluting their equity or having the hassle of running a listed corporation.

    Finally, it may be the ease of setting up a business makes listing not so necessary. A software company needs nowhere the capital required by a manufacturing venture so going to the market just isn’t necessary.

    Should the lack of listing be a permanent thing then again we may see another force changing management and business cultures.

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