stories filed under: "vc"
Rock star involvement in the venture capital industry is old hat (see: Bono), but there aren't many examples of the opposite, VCs getting into rock. The Wall Street Journal reports on one UK VC firm that's taken to financing comeback albums from has-been rock bands, like UB40 and Prodigy. The firm sees itself as filling a funding gap brought on by the tough times facing record labels these days. It also believes that these albums offer steadier, more predictable returns than those from unknown bands. What's funny is that this is exactly the opposite of the typical VC strategy, which typically involves placing bets on lots of losers, with a few winners accounting for all of the profits. So far, it sounds like the fund isn't doing particularly well, though for now it's sticking with the strategy. There is certainly a lot of room for improvement in the record label model as it relates to funding bands, but it seems doubtful that simply replicating the traditional model with washed-up bands will yield great results. From VC guys, you'd hope to see something a bit more innovative, perhaps something along the line of Bowie Bonds. Peter Gabriel Bonds anyone?
Wed, Aug 1st 2007 7:15pm
from the black-stone dept
Ever since private equity firm Blackstone came public earlier this year, there's been a strong backlash against the entire industry. Congress is looking to close a tax loophole that effects both private equity and VC firms, prompting some venture capitalists to lash out against private equity executives for drawing political scrutiny and potentially ending the party. But as Andrew Ross Sorkin points out, all of this outrage pointed at the industry (and Blackstone chief Stephen Schwarzman specifically) is a bit overdone. Plenty of executives could accused of having a big ego or of throwing big, garrulous parties in their own honor, as Schwarzman has done. Ultimately, it was the company's IPO that served as the catalyst for the outrage, so Blackstone, simply by virtue of being first to go public, has borne the brunt of it all. That being said, if things start to deteriorate economically, expect even more outrage at any executive perceived as having cashed out at the top.
Mon, Jul 30th 2007 11:40am
from the we-need-money,-but-for-what-we-can't-say dept
The news that the micro-blogging/message service Twitter has attracted a round of venture capital funding has been greeted with the requisite back-slapping and congratulations, but also with some bemusement by folks wondering what the company's business model is. Even the investors, Union Square Ventures, don't know yet, and say the investment will go towards making Twitter "a better, more reliable and robust service." Paul Kedrosky offers an interesting take on the matter by saying that for companies looking for VC money, business plans and profits are overrated. He contends that offering VCs a detailed business plan only gives them more things to nitpick, while early profits can overinflate their expectations, so it's better for a startup looking for cash to go light on both. It's easy to take his point to an extreme and say it's yet more evidence that we're in another bubble, but Kedrosky really seems to be saying that startups shouldn't pitch their detailed plans to VCs, and not that they shouldn't have one at all. Of course, regardless of whether you have business plan or not, if you can grab the traffic and attention of something like Twitter, there will be plenty of VCs ready to open their wallets, either as a vanity investment, or because they know they should be able to flip the company to a bigger buyer pretty quickly -- much like Union Square did with a previous investment, the social-bookmarking service Del.icio.us, which was later bought by Yahoo.
from the what-took-you-so-long dept
While venture capital funds have flowed into all sorts of internet-related businesses, they've largely ignored adult-oriented ones, despite the opportunities that market offers. But, the IHT reports, that may be starting to change as VCs get over the stigma of investing in porn companies or other adult-related businesses. While some people say "investment tastes" may be changing, it seems more likely that the VCs' need to find good deals is trumping their moral objections or comfort levels, as they face increasing competition for deals and growing displeasure from their backers about mediocre returns on their investments. On these fronts, sexually oriented businesses are a winner, since relatively few firms want to invest in them, while the market for adult content and other products and services can be a money-spinner. Still, it's early days, and many VCs (or the limited partners who back them) don't want to invest in porn or other sex businesses -- but it looks like that resistance may be lessening as the desire for cash wins out.
Fri, Jul 13th 2007 3:37pm
from the the-power-to-tax-is-the-power-to-destroy dept
The VC community has expressed concern that changes to the tax code, intended to hit private equity firms, will end up hurting them as well. Given the explosion in alternative investment vehicles and the large sums that these companies have been raking in, politicians have been keen to make sure that they're all paying their "fair share", whatever that means. But perhaps the issue is being overblown on all sides. According to one estimate, the change would only bring the government an additional $2 billion in annual tax revenue. From the perspective of industry and government, that's really a mere pittance. Of course, it should make one wonder why Congress is spending so much time debating this issue. If it's not about raising revenue, and only about going after a successful, high-profile segment of the economy, then the push would mainly seem to be about politics.