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Twitter shares surge on report of possible takeover

 

Shares of social media platform Twitter surged more than 20 percent in morning trading Friday on reports that the company will soon receive a formal bid from a high-profile suitor, according to CNBC.

Possible contenders for the acquisition of San Francisco-based Twitter include Salesforce, Google and other high-profile tech names interested in the data it’s collected.

“Twitter’s board of directors is said to be largely desirous of a deal, according to people close to the situation, but no sale is imminent,” CNBC reported Friday.

“One source close to the conversations said that they are picking up momentum and could result in a deal before year-end.”

Requests for comment by the Business Times from Twitter, Google and Salesforce were not returned Friday.

At the end of July, slowing advertiser demand and a weakened revenue forecast walloped Twitter, pushing its share price down as the company scrambled to reassure investors it was on the right path.

Twitter recently ratcheted down its revenue guidance to a range of $590 million to $610 million in the third quarter, a significant drop from the $681.4 million analysts had expected. More importantly, Twitter said it had “less overall advertiser demand than expected,” as brands decided not to invest in the platform, adding to ongoing concern about how it will continue to make money.

On an earnings call Tuesday, CEO Jack Dorsey, CFO Anthony Noto and COO Anthony Bain said they are confident Twitter can continue to attract new users. Twitter is hoping new live video deals will lure in more users, and with them, advertising dollars.

Video streaming is part of a suite of new features rolled out by the company in recent months, including tools to allow users to create polls, make political donations and post photos or videos without affecting the 140-character count of tweets.

Twitter also has introduced the ability to buy products and services via a one-step button.

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FlashStock_Logo-1-37694ea8-0d12-48fd-9dac-529f1e58feda

FlashStock Selected as Salesforce Social Studio Partner

FlashStock Enables Salesforce Customers to Create a Customized Library of Lifestyle Images for Social Platforms

TORONTO, ON–(Marketwired – March 04, 2015) – FlashStock Technology Inc. today announced it has been selected as a partner application for Salesforce  Social Studio, the collaborative content marketing, social engagement, publishing and analytics solution from the Salesforce Marketing Cloud. The FlashStock app brings a customized library of lifestyle images to Social Studio, helping marketers create custom, authentic imagery for social platforms.

“With the popularity of social platforms like Facebook, Instagram and Twitter, brands need to create interesting and authentic imagery daily,” said FlashStock’s CEO Grant Munro.  “FlashStock extends a brand’s content creation capabilities by connecting them to a network of global photographers.”

The FlashStock app allows Social Studio customers to create briefs and build a custom image library that can be used across all social platforms.

FlashStock is available to all brands using Social Studio.  For more information on the partnership, visit the www.flashstock.com/blog.

Salesforce, Salesforce Marketing Cloud, Social Studio and others are among the trademarks of salesforce.com, inc.

About FlashStock Technology Inc.

FlashStock was created with the belief that marketers are struggling to get the images they need — images of real people enjoying their products, at a price and in quantities that make sense. FlashStock builds technology that connects organizations that need content to photographers who are interested in creating it for them. FlashStock’s goal is to create the world’s largest on-demand photo service, transforming the stock photography industry and providing brands with cost effective alternatives to conventional and expensive professionally-crafted image procurement.

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While we often think of small nimble startups as the true innovators in technology, that hasn’t necessarily been the case in network infrastructure for the last few years. A study of venture capital funding from Ovum shows that while overall tech investment has recovered since the dark days of the recession, the vast majority of that spending went to services and applications startups like Facebook, Twitter, WhatsApp and Spotify.

Meanwhile, the startup companies that make the gear over which those services traverse have seen investment fall from $796 million in 2009 annually to just $270 million in the 12 months ending in June, Ovum found. According to Ovum principal analyst Matt Walker:

“A funding disconnect has thereby emerged between network builders and network users. Lots of innovation and venture capital is targeting the network users, such as mobile apps and OTT platforms. However, little of it is directly helping the network builders. With a weak start-up pipeline, the industry relies more on incumbent vendors to generate new ideas and products. Their budgets are bigger, but VCs are often better at funding ‘game changing’ ideas ignored by established vendors.”

Admittedly, investing in the next big social network or an app that could generate millions of downloads is a lot sexier than, say, envelope tracking technology or cell site radio frequency filters. But those infrastructure innovations are just as important. The capabilities of many apps and services have already far exceeded the ability of our mobile networks to deliver those apps and services at a reasonable cost (think Netflix on 4G tablet). If we let network innovation slip, we could wind up with a bunch of very powerful services that have nowhere to go.

As Walker points out, the onus for innovation thus falls on the big established telecom vendors, and it’s quite the burden. Ovum estimates that with the falloff in startup investment, big network infrastructure makers’ R&D budgets are now 90 times larger than the investment going into networking startups –- that’s up from 30X two years ago.

Don’t get me wrong — the Ciscos, Ericssons and Huaweis of the world are responsible for some amazing science and innovation. And today they’re building the small cell and heterogeneous networks of the future. But there are limits to what the big vendors can accomplish. The R&D budgets of the big industrial labs have shrunk immensely in the last two decades, and there’s only so much talent and so many resources those vendors can devote to innovation.  The biggest issue, though, is that the big equipment makers innovate in much different ways than small startups.

Big vendors have big ingrained investments

Look around. A lot of the wired and wireline networks we use on a daily basis have been with us for a while. The first 2G networks in the US went up in the late 1990s and they’re largely still in use. A good part of the big vendors’ businesses is maintaining, upgrading and iterating on the networks they’ve already built.

That doesn’t mean the big vendors are merely redesigning the same old equipment, but they’re definitely looking for continuity with their older networks. Alcatel-Lucent’s lightRadio and Nokia Siemens’ Liquid Radio architectures, for instance, are truly mind-blowing approaches to the new heterogeneous network, but they’re still fundamentally the cellular technologies that have been these vendors’ bread and butter since the birth of wireless.

When Wi-Fi came along as a mobile data alternative to cellular, these vendors were resistant if not outright hostile. It took two startups, BelAir Networks and Ruckus Wireless to make the business case to carriers for large-scale outdoor Wi-Fi networks to supplement 3G and 4G networks.

 

The lightRadio Cube, Alcatel-Lucent’s vision for the small cell.

The big vendors are working largely within global standards frameworks. That’s by no means a bad thing. It’s why an iPhone can communicate with a Nokia-built base station, and a Cisco router can be plugged into an Ericsson core network. But standards work is painfully slow. A lot of the innovation work in networking technology works goes on outside of the standards bodies, and if that work proves successful it wind up shaping the standards themselves.

There’s probably no better example in wireless than CDMA. Qualcomm’s upstart cellular interface was initially adopted by a single US carrier, AirTouch, but it eventually became the basis for all global 3G networks.

Innovating between the lines

While the big vendors have focused on the overarching evolution of networks it’s up to infrastructure core technology startups to fill in technology gaps. Companies like NSN and Ericsson will most certainly handle the large-scale rollout of small cells and hetnets in the future, just like Apple and Samsung will be designing our future 4G smartphones and connected tablets.

But it will be startups like Seattle’s still under-the-radar PivotBeam that are developing the critical software defined antennas that will link these millions of small cells back to the network core. And it will be small engineering companies like Nujira and Quantance supplying the power envelope tracking technology giving those 4G phones a tolerable battery life.

I’m not saying all of these specific companies are all going to be the next Qualcomm, and that you should go invest in them. But they’re part of a critical network infrastructure startup scene, and that scene appears to be shrinking. We’re already starting to see the consequences. The industry has started delivering speed in the form of LTE but it has so far failed to deliver us the cheap capacity critical to moving the mobile industry forward. If the investors keep neglecting network startups, that problem is only going to get worse.

Read more here.

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Article from NYTimes.

Few investors have ridden the recent Internet boomlet like the GSV Capital Corporation.

After GSV announced in June 2011 that it was buying a stake in the privately held Facebook, the closed-end mutual fund surged 42 percent that day. Capitalizing on the euphoria, GSV sold another $247 million of its shares, using the money to expand its portfolio of hot start-ups like Groupon and Zynga.

Now, GSV is feeling the Facebook blues.

When the public offering of the social network flopped, GSV fell hard, and it still has not recovered. Shares of GSV, which were sold for an average of $15.35, are trading at $8.54.

“We probably benefited from our stake in Facebook more than we deserved on the way up,” said GSV’s chief executive, Michael T. Moe, “and were certainly punished more than we deserved on the way down.”

GSV, short for Global Silicon Valley, is the largest of several closed-end mutual funds that offer ordinary investors a chance to own stakes in privately held companies, at least indirectly. Closed-end funds like GSV typically sell a set number of shares, and their managers invest the proceeds. In essence, such portfolios operate like small venture capital funds, taking stakes in start-ups and betting they will turn a profit if the companies are sold or go public.

“I think GSV was really innovative in creating a kind of publicly traded venture capital fund,” said Jason Jones, founder of HighStep Capital, which also invests in private companies.

But the shares of closed-end funds trade on investor demand – and can go significantly higher or lower than the value of the underlying portfolios. The entire category has been hit by Facebook’s troubles, with GSV trading at a 38 percent discount to its so-called net asset value.

Mr. Moe, 49, has previously experienced the wild ups and downs of popular stocks.

A backup quarterback at the University of Minnesota, he started out as a stockbroker at the Minneapolis-based Dain Bosworth, where he wrote a stock-market newsletter called “Mike Moe’s Market Minutes.” He met the chief executive of Starbucks, Howard Schultz, on a visit to Seattle in 1992, and he began covering the coffee chain after its initial public offering.

“I left believing I had just met the next Ray Kroc,” Mr. Moe wrote in his 2006 book, “Finding the Next Starbucks,” referring to the executive who built the McDonald’s empire.

After stints at two other brokerage firms, Mr. Moe became the director of global growth research in San Francisco at Merrill Lynch in 1998. There he ran a group of a dozen analysts at a time when mere business models “were going public at billion-dollar valuations,” he said.

Shortly after the dot-com bubble burst, he founded a banking boutique now called ThinkEquity. At the time, he expected the I.P.O. market to shrug off the weakness and recover in a couple of years. Instead, it went into a decade-long slump.

“Market timing is not my best skill,” Mr. Moe said. In 2007, he sold ThinkEquity.

The next year, he started a new firm to provide research on private companies, NeXt Up Research. He later expanded into asset management, eventually changing the name to GSV. Within two months of starting his own fund, he bought the shares in Facebook through SecondMarket, a marketplace for private shares.

GSV soon raised additional funds from investors and put the money into start-ups in education, cloud computing, Internet commerce, social media and clean technology. Along with Groupon and Zynga, he bought Twitter, Gilt Groupe and Spotify Technology. The goal is finding “the fastest-growing companies in the world,” he said.

But Mr. Moe has paid a high price, picking up several start-ups at high valuations on the private market. He bought Facebook at $29.92 a share. That stock is now trading at $19.10. He purchased Groupon in August 2011 for $26.61 a share, well above its eventual public offering price of $20. It currently sells at $4.31.

Max Wolff, who tracks pre-I.P.O. stocks at GreenCrest Capital Management, said GSV sometimes bought “popular names to please investors.”

“This is such a sentiment-sensitive space, the stocks don’t trade on fundamentals,” Mr. Wolff said, adding, “If there’s a loss of faith, they fall without a net.”

GSV’s peers have also struggled. Firsthand Technology Value Fund, which owns stakes in Facebook and solar power businesses like SolarCity and Intevac, is off 65 percent from its peak in April. “We paid too much” for Facebook, said Firsthand’s chief executive, Kevin Landis.

Two other funds with similar strategies have sidestepped the bulk of the pain. Harris & Harris Group owns 32 companies in microscale technology. Keating Capital, with $75 million in assets, owns pieces of 20 venture-backed companies. But neither Harris nor Keating owns Facebook, Groupon or Zynga, so shares in those companies have not fallen as steeply.

GSV is now dealing with the fallout.

In a conference call in August, Mr. Moe was confronted by one investor who said, “the recent public positions have been a disaster,” according to a transcript on Seeking Alpha, a stock market news Web site. While Mr. Moe expressed similar disappointment, he emphasized the companies’ fundamentals. Collectively, he said, their revenue was growing by more than 100 percent.

“We have been around this for quite some time, and we are going to be wrong from time to time,” Mr. Moe said in the call. “But we are focused on the batting average.”

In the same call, Mr. Moe remained enthusiastic – if not hyperbolic – about the group’s prospects. Many of GSV’s 40 holdings are in “game-changing companies” with the potential to drive outsize growth, he told the investors.

Twitter, the largest, “continues to just be a rocket ship in terms of growth, and we think value creation,” he said. The data analysis provider Palantir Technologies helps the Central Intelligence Agency “track terrorists and bad guys all over the world.” The flash memory maker Violin Memory “is experiencing hyper-growth,” he wrote in an e-mail.

But Mr. Moe was a bit more muted in recent interviews. While he says he still believes in giving public investors access to private company stocks, he recognizes the cloud over GSV. “We unfortunately have a social media segment that got tainted. I completely get why our stock is where it is. It’s going to be a show-me situation for a while.”

Acknowledging some regrets, Mr. Moe said he was angriest about overpaying for Groupon, saying, “Yeah, I blew Groupon.” He said that he also did not anticipate what he called a deceleration in Facebook’s growth rate, and that it was “kind of infuriating” that some of its early investors were allowed to exit before others. GSV often must hold its shares until six months after a public offering.

But the downturn in pre-I.P.O. shares has a silver lining, Mr. Moe said. Since the Facebook public offering, he has been able to put money to work “at better prices.” He recently bought shares of Spotify at a valuation of about $3 billion, roughly 25 percent below the target in its latest round of financing.

The I.P.O. market is also showing signs of life, he said, with the strong debuts of Palo Alto Networks and Kayak Software. And he still has faith in Facebook.

Whatever its current stock price, at least it is a “real company” with revenue and profit, Mr. Moe said, adding, “It’s not being valued off eyeballs and fairy dust.”

Read more here.

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Article from NYTimes.

 

Institutional Venture Partners has another billion to play with.

The venture capital firm, an investor in Twitter, Zynga and LivingSocial, has raised $1 billion for I.V.P. XIV, its 14th and largest fund to date.

According to a partner, Sandy Miller, the firm initially set a $750 million target but increased it on robust demand. The fund, which was raised over four months, relied mainly on capital from previous investors.

Unlike some of its peers, Institutional Venture Partners does not write a lot of checks, usually not more than a dozen a year. As a later-stage investment firm, it invests $10 million to $100 million in seasoned start-ups in three main buckets: Internet, enterprise technology and mobile.

“I hate to sound dull but we’re doing the same strategy,” Mr. Miller said.

Mr. Miller, a longtime technology investor and co-founder of Thomas Weisel Partners, is optimistic despite recent setbacks in the technology sector.

Skepticism in the public markets, most recently highlighted by Facebook‘s underwhelming initial public offering, has damped enthusiasm for some late-stage start-ups. Zynga, for instance, an Institutional Venture Partners portfolio company, has tumbled more than 44 percent since its debut last year. And plenty of experts question whether another start-up it has backed, LivingSocial, is worth such a high valuation after Groupon, its far bigger rival, has fallen about 50 percent since its I.P.O.

Mr. Miller acknowledges that some valuations may pull back, but he says he invests for the long term.

“I’ve watched the technology market over a 30-year period,” he said. “There’s more interesting, high quality companies today than there has ever been and by a very wide margin.”

He added, “In every market, most deals don’t make sense, and that’s true now, but that’s always been true.”

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Article from NYTimes.

MENLO PARK, Calif. — Matt Cohler was employee No. 7 at Facebook. Adam D’Angelo joined his high school friend Mark Zuckerberg’s quirky little start-up in 2004 — and became its chief technology officer. Ruchi Sanghvi was the first woman on its engineering team.

All have left Facebook. None are retiring. With lucrative shares and a web of valuable industry contacts, they have left to either create their own companies, or bankroll their friends.

With Facebook’s public offering in mid-May, more will probably join their ranks in what could be one of Facebook’s lasting legacies — a new generation of tech tycoons looking to create or invest in, well, the next Facebook.

“The history of Silicon Valley has always been one generation of companies gives birth to great companies that follow,” said Mr. Cohler, who, at 35, is now a partner at Benchmark Capital, and an investor in several start-ups created by his old friends from Facebook. “People who learned at one set of companies often go on to start new companies on their own.”

“The very best companies, like Facebook,” he continued, “end up being places where people who come there really learn to build things.”

This is the story line of Silicon Valley, from Apple to Netscape to PayPal and now, to Facebook. Every public offering creates a new circle of tech magnates with money to invest. This one, though, with a jaw-dropping $100 billion valuation, will create a far richer fraternity.

Its members will be, by and large, young men, mostly white and Asian who, if nothing else, understand the value of social networks. And they have the money. Some early executives at Facebook have already sold their shares on the private market and have millions of dollars at their disposal.

Mr. Cohler, for example, is at the center of a complex web of business and social connections stemming from Facebook.

In 2002, barely two years out of Yale, he was at a party where he met Reid Hoffman, a former PayPal executive who was part of a slightly older social circle. The two men “hit it off,” as Mr. Cohler recalled on the online question-and-answer platform, Quora (which was co-founded by Mr. D’Angelo). He became Mr. Hoffman’s protégé, assisting him with his entrepreneurial investments, and following him to his new start-up, LinkedIn.

Then, Mr. Cohler joined a company that Mr. Hoffman and several other ex-PayPal executives were backing: Facebook.

Mr. Cohler stayed at Facebook from 2005 to 2008, as it went from being a college site to a mainstream social network. One of his responsibilities was to recruit the best talent he could find, including from other companies.

Mr. Cohler left the company to retool himself into a venture capitalist. He has since been valuable to his old friends from Facebook.

Through his venture firm, Mr. Cohler has raised money for several companies founded by Facebook alumni, including Quora, created in 2010 by Mr. D’Angelo and another early Facebook engineer, Charlie Cheever. Other companies include Asana, which provides software for work management and was created in 2009 by Dustin Moskovitz, a Facebook co-founder; and Peixe Urbano, a Brazilian commerce Web site conceived by Julio Vasconcellos, who managed Facebook’s Brazil office in São Paulo.

Mr. Cohler has put his own money into Path, a photo-sharing application formed in 2010 by yet another former Facebook colleague, Dave Morin. Path is also bankrolled by one of Facebook’s venture backers: Greylock Partners, where Mr. Hoffman is a partner.

And he has invested in Instagram, which was scooped up by Facebook itself for a spectacular $1 billion. “Thrilled to see two companies near and dear to my heart joining forces!” Mr. Cohler posted on Twitter after the acquisition.

Instagram clearly was a good bet; it is impossible to say whether any of the other investments Mr. Cohler or other Facebookers are making will catch fire or whether the start-ups they found will last. Certainly, there is so much money in the Valley today that start-ups have room to grow without even a notion of turning a profit.

Ms. Sanghvi, one of the company’s first 20 employees, married a fellow Facebook engineer, Aditya Agarwal. Mr. Zuckerberg attended their wedding in Goa, India.

Read the rest of this article here.

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Article from GigaOm.

“The investment team at the Kauffman Foundation believes the venture capital industry is broken and they — or rather investors in VC funds — are partially to blame. The report condemns venture firms for being too big, not delivering returns, and not adjusting to the times. But then it blames the situation on a misalignment of incentives: Namely, limited partners that invest in venture firms have done so in a way that encouraged VCs to raise huge funds at a time when huge funds weren’t really warranted. And now, for the Kauffman Foundation at least, the chickens have come home to roost. From the report:

The most significant misalignment occurs because LPs don’t pay VCs to do what they say they will — generate returns that exceed the public market. Instead, VCs typically are paid a 2 percent management fee on committed capital and a 20 percent profit-sharing structure (known as “2 and 20”). This pays VCs more for raising bigger funds, and in many cases allows them to lock in high levels of fee-based personal income even when the general partner fails to return investor capital.

A smaller VC industry is needed

The solutions to the problem — changing the compensation structure, investing in smaller funds where the partners have also committed at least 5 percent of their own capital, investing directly in startups or alongside funds at later stages, and taking more money out of the over-saturated VC market — are already happening. Look at the widespread trend of angels or smaller funds created by a few investors. Or look at the rise of hedge funds or Digital Sky Technologies’ investing directly in hot companies like Twitter or Facebook at crazy valuations.

It’s unclear if other LPs will take the advice issued in this report, but the trends around VC investment these days are fairly clear. There are plenty of firms willing to put small amounts in at an early stage, so they have the option to keep playing if the deal gets hot. And they are just as likely to drop firms quickly around the second (Series B) fundraiser if they aren’t shaping up into a Pinterest or a Spotify. This hit-driven style of investment is a symptom of too much money chasing a new type of startup, and it’s likely that venture investors will compete until much of the return is squeezed out of a hot deal. And that’s no good for limited partners either.

The Kauffman report lists the ways it has decided to solve the mismatch between LPs and venture firms, and it goes into a lot of depth on how to improve the industry overall. But if one agrees with the assessment and solutions offered in the report, it also will result in some serious questions about the startup economy. The venture industry invested $28.4 billion into 3,673 deals in 2011, according to the NVCA and the PWC MoneyTree report. About 50 percent of their total investments were in seed and early-stage companies.

Does less venture money mean fewer startups?

Following the Kauffman Foundation’s suggestions means the pool will shrink. In many ways this is a good thing, as there will be less money chasing the few standout deals, but it also opens the door to thinking about building companies in a connected era. Angels are already picking up some of the VC slack and will likely continue to do so. Once Facebook goes public, I expect we will see a host of newly minted millionaires playing at being an angel or perhaps taking their riches and using it to build something new.

For those without soon-to-be-liquid options, Kickstarter and the gold rush promised by the JOBS Act are also likely to fill the gap. So it’s entirely possible the pool of venture capital will shrink while the pool of startups will remain about the same. In such a scenario, VCs, angels and then the rest of us play the role of investor. It’s a role millions already undertake, with Kickstarter’s seeing $200 million pledged and 22,000 projects funded since its founding.

And the passage of the JOBS Act means startups can now beg for money among the ranks of friends and family who aren’t accredited investors. I for one am leery of this development, believing it ripe for scams. The law also has the side effect of cloaking information about companies until right before they hit the public markets, which I think is the exact opposite of what a bill that encourages consumer investment ought to do. But still, there will be legitimate companies that will be able to start businesses thanks to the bill.

And as lawyers and entrepreneurs get comfortable with the law, new funding platforms should arise. So perhaps the Kauffman Foundation will find itself on the cusp of a trend, from the old-school style of fundraising where an entrepreneur has few choices and has to play by the VC industry’s rules to a crowdsourced and connected era of raising capital that mimics how the Web is changing a variety of businesses. Maybe the VC industry is like Motown. And it’s going to have to adjust to the new reality.”

Read more here.

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