Internet Business: Slightly Different Points of View
September 29, 2014
First, navigate to “Another Top Investor Sounds the Alarm: When the Market Turns, a Bunch of Startups Are Going to Vaporize.” No big surprise here. The main idea is, in my opinion:
Over the past few years, it’s been relatively easy for startups to raise money from venture capitalists. In some cases, they’re raising hundreds of millions of dollars to keep their companies afloat. But behind the scenes, they’re plowing through that money either on marketing, overhead, or some other expense, which results in high burn rates. These bloated companies are using their millions to hide serious flaws in their business models.
At some point, those who provide the bucks to the venture firms will want a return. Many of the Fancy Dan outfits are not among the world’s most liquid operations. To raise cash, MBAs and accountants can cook up some quite remarkable solutions. The actions cascade down the line and end up pushing technology companies like those that pitch wild and crazy content technology into an Iron Maiden. This is essentially a casket with spikes protruding into the box and spikes pointing into the box on its lid.
Ta da.
The individual is placed into the Iron Maiden and the door is shut. Ouch.
Now navigate to either the Google book itself or the concepts Web site at http://bit.ly/1mr9OvS. Eric Schmidt argues that businesses should be like Google. You know the moon shots, trying stuff and failing fast (I am not sure how fast Google has failed at social networking, but I don’t want to be argumentative), and value numbers/data over any humanoid subjectivity.
For many search and content processing companies, the senior managers have been failing for years in some cases. I want to make a list of would be start ups and then provide their date of inception. Heck, why embarrass outfits like Attivio, Coveo, Digital Reasoning, Lucid Imagination (now Lucid Works to which I am tempted to add “Really? but I will not.”), and quite a few others.
The point is that we have two somewhat conflicting interpretations of the present business climate. The tweets that inspired the Business Insider write up are taking a hard look at what happens when the money goes away. No money means that affected firms first people, raise prices, and pivot along with a half dozen or so MBA maneuvers before shutting the doors as Convera, Delphes, did Entopia. A few lucky outfits will sell out like Endeca, Exalead, and iPhrase. A few will struggle along sort of open and sort of closed like a number of French search and content processing firms.
On one hand, these outfits are toast if more money is not “found.” On the other hand, forget money. In Google’s world view, these companies need to be more like Google or out Google Google.
The reality is that the contraction of search and content processing has already begun. Some outfits are going to have to find a way to deliver a solution that solves an actual problem and generates sustainable revenue. Companies in this spot include IBM with its Watson project, Hewlett Packard with its Autonomy IDOL technology, and Palantir, a billion dollar baby of considerable note.
My view is that the doom and gloom expressed in the Business Insider write up is more likely to occur than a Google style entity arising from the Google Moon shot and allied suggestions. I am not sure the Google recommendations apply to Google. A company that is 15 years old and has one revenue stream may be a success that fulfills Steve Ballmer’s one trick pony observation.
For search and content processing vendors, there is no easy way out unless money remains plentiful and Google’s advice actually works for an information retrieval company.
Stephen E Arnold, September 29, 2014
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