More bad news for Startups and Venture Capitalists from the New York Times “bits” section about technology trends. Not only is the number of IPOs falling (zero in Q2 of 2008), but it also the number of mergers or aquisitions of startups appears to be way off as well.
Venture capital folks look to the most favorable “liquidity event” and generally that is an IPO where they may realize tens or even hundreds of times their original investments. Also favorable though generally offering less profit than an IPO is an aquisition or merger where other companies take over the startup without it going public.
I found this number very interesting and potentially alarming for Venture investors: An average of 8.6 years from startup to IPO, the longest in some time. Given that the present value of money is greater than future value, time horizons this long suggest, for example, that even a doubling of your VC money over that long period of time would represent only a “fair to poor” return compared to alternatives. Given that most startups never go IPO anyway it would seem that the risk factor is going way up for these investments.
Thanks to Danny Sullivan for picking up a clever way to access WSJ articles without a subscription (and perfectly legally as well) by using Google News to find the articles and then clicking through to the stories.
As TechDirt reported a few weeks ago Dow Jones had decided not to follow the New York Times and drop the WSJ’s paywall. The revenue considerations are tricky, if not impossible to figure out in these situations. NYTs has seen an explosion of traffic but I think modest increases in online revenues which were never a big source for them anyway. The battle between print and online continues to rage and I think now everybody knows the inevitable conclusion – online will win, but won’t necessarily create a lot of profits for the winners.
The New York Times reports that ABC and Facebook have developed a plan to cover the US Presidential campaign debates that come just before the New Hampshire primaries. The January 5 event promises to allow Facebookers to participate very actively in the events, most notably interacting directly with reporters covering the candidates.
Despite some skepticism that Facebook users care much about politics, clearly this is another minor milestone in social networking and the effect of the online world …on the offline world.
Two articles today suggest how tough it’s becoming to turn a buck in the print media world. Jeff Jarvis at BuzzMachine and founder of eWeek, notes in “Whither Mags”, that major print efforts require a huge capital outlay before they can even hope to be profitable, and that the current high risk associated with print publications means we probably won’t see nearly as many new big magazine efforts.
Even more ominous is the New York Times report today showing circulation declines almost across the board for US Newspapers. The NYT Article “More Readers Trading Newspapers for Websites” has a great graphic showing how circulation has fallen at most newspapers since last year with an average drop of 2.4%. Given the relatively thin profit margins at many papers and the fact many costs are fixed this does not bode well at all for the future of newspapers. The future of news? That is a far more complex question and I think the answer is not knowable at this time. Blogs are picking up some of the journalistic slack, but I’m not convinced they can pick up all of it.