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Tech froth has some investors talking bubble

A tech entrepreneur recently was celebrating his good fortune at a penthouse party overlooking the Las Vegas Strip, but the scene could well have unfolded in New York, San Francisco or any other city where entrepreneurs are feeling the glow of success.

“It’s spectacular, befitting this conference and the people here,” gushed Joe Liebke, CEO of Villaway, a luxury-vacation company that hosted a party during the recent tech-centric Collision Conference here. “Enjoy it.”

Enjoy, the tech industry has. A dizzying mix of bold ideas and lavish investments has catapulted dozens of privately held start-ups to unicorn status, defined as having market valuations of at least $1 billion often without soaring revenues to match. Social-sharing site Pinterest has soared to $11 billion. Ride-hailing company Uber is now worth a staggering $50 billion.

How long can the party last?

While not all tech sector veterans invoke the catastrophic dot-com bubble of 2000, many are nonetheless concerned a correction of sorts is imminent, according to interviews with more than a dozen VCs and executives.

“I do think you’ll see some dead unicorns this year,” venture stalwart Bill Gurley of Benchmark Capital told a crowd at South by Southwest a few months ago. That sentiment was echoed weeks later by Sequoia partner Michael Moritz, who declared: “A considerable number of unicorns will become extinct.”

The belief is that revenue isn’t growing fast enough to justify these bloated values as companies rapidly burn through cash. The fear is that wounded unicorns will trip up the trumped-up value of many other tech start-ups. And the reality is that when social-media titans Twitter (TWTR), LinkedIn (LNKD) and Yelp (YELP) recently posted middling quarterly results, it served only to fuel the unease.

The pitfalls of an inflated market value is highlighted by the cautionary tale of Box (BOX), which went public in January. The cloud-storage provider had a valuation of about $2.4 billion when it raised a VC investment of $150 million in July 2014. But by the time it went public, its valuation had sunk to $1.7 billion.

“You can’t smell the soap when you are inside the bubble too long,” says David Chao, co-founder and general partner at DCM Ventures, told USA TODAY. “Everyone in the industry knows it’s a bubble but just wants to believe otherwise. (It’s) human psychology. This cycle of the tech bubble will last until smartphone penetration tapers off worldwide in about 18 months.”

Tech maverick Mark Cuban doesn’t mince words. “I have absolutely not (sic) doubt in my mind that most of these individual Angels and crowd funders are currently under water in their investments, absolutely none,” he wrote in a blog post titled, “Why This Tech Bubble Is Worse Than the Tech Bubble of 2000.”

He continued, “There is ZERO liquidity for any of those investments. None. Zero. Zip. … The only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity.”

HOW 2015 ISN’T 2000

Such dire warnings aside, there are clear distinctions between the two eras, according to many VCs and tech executives who have lived through both and spoke to USA TODAY for this article. Technology, for one, is more deeply entrenched in the U.S. economy and less susceptible to a cataclysmic crash.

Former Apple CEO John Sculley says a changing audience — Millennials weaned on mobile devices and the share economy, for example — considerably alters today’s tech landscape.

“A lot of it is timing,” he says, pointing out similarities between failed dot-com delivery plays such as Webvan and today’s more successful iterations such as Google, which runs Google Express. Today’s start-ups are valued higher, but they are “real businesses” with proven financial models, he says.

Although there is more private capital chasing deals than ever before, “I wouldn’t call it a bubble,” says Kevin Iudicello, managing director of Pagemill Partners. “Most of the companies are in good shape, and there is no question they will grow — but at that valuation?”

That depends on whether private investors continue to overreact to the unicorn phenomenon, providing late, gigantic cash infusions in the hope of getting equity in the next Google or Facebook.

“There is a migration of capital from public markets to private,” says Scott Kupor, managing partner at Andreessen Horowitz. “We just haven’t seen these billion-dollar valuations overnight. But if you think of it as substitution of relatively fewer IPOs, concentration of money has shifted.”

“If it’s a bubble, it’s the strangest bubble we’ve seen by all dimensions,” Kupor says.

Research provided by Andreessen Horowitz shows just how much more super-heated the investment waters were in 2000, with far more money chasing considerably more tenuous business ventures that seemed eager to become IPOs at all costs. In 1999-2000, there were 632 tech IPOs, compared with 510 in the 13 subsequent years. In 2014, there were 49 public offerings, and just four so far this year.

Companies that went public last year had been around an average of 11 years. In 1999-2000, most companies rushed into their IPO after just 4½ years. On the money side, $33 billion was raised in venture capital in 2014, compared with $50 billion in 1999 and $105 billion in 2000.

Companies are staying private longer for a variety of reasons: to avoid the public market meltdown that befell their predecessors at the turn of the 21st century; structural changes in capital markets; and the rise of the activist shareholder.

But while aggregating an audience through “eyeballs” (customers) was the main goal 15 years ago, most of the unicorns today — think Uber and Airbnb — are built around real solutions, says Justin Kitch of Curious.com, formerly Homestead. He had been courted by bankers and filed to take Homestead Technologies public just before the 2000 bubble popped. Instead, he kept Homestead private for seven years, until it was sold to Intuit for $170 million in 2007.

“It used to be growth at all costs,” Kitch says. “What is happening today is once someone gets a high value, it is passed along to similar companies, regardless of the company. Uber is a real business, in a transformative industry. It is not a Webvan.”

THIS TIME ‘PUBLIC MARKETS HAVE LEARNED’

Trinity Ventures partner Patricia Nakache has worked as a venture capitalist for more than 15 years and witnessed the boom and bust of the dot-com bubble and great recession. Having carved out a name for herself as an investor in mobile commerce, she is seeing trends as an investor that mirror those of the late 1990s — particularly around the way entrepreneurs manage their relationship with the VC world.

Despite these similarities, the differences are notable. In 2000, the bubble extended to public markets, but this time it is concentrated in growth equity of VC, especially those that raised $1 billion via mega-rounds. “It’s like a temperature inversion, but it is more pronounced,” she says. “We have a localized bubble. The public markets have learned.”

In fact, “the public market is more rational than the private sector, which is overpaying in later rounds,” says Joe Horowitz, managing general partner at Icon Ventures. “They have been set up for disappointment.”

The escalated valuations are emblematic of a tech-heavy Nasdaq market, which topped 5,000 points for the first time in 15 years earlier this year, and stratospheric market valuations for publicly traded companies such as Apple, Microsoft, Google and Facebook.

But those companies are established, pumping out profits in the billions of dollars.

Burn rates, the amount of cash companies are losing every month to operate, are spinning out of control, Gurley and others contend. Start-ups are spending at a rate far out-stripping revenue in attempts to drive growth.

There is also the possibility of an X-factor: unexpected events in Middle East or China that roil the market.

The real bubble is in bonds, says Peter Thiel, a PayPal co-founder and early investor in Facebook. “Central bankers have intervened to drive up prices, and that won’t last forever,” he says. “There are overvalued companies today — just like there are at all times — but the best companies are still seriously undervalued.”

Thiel says it’s important to note that those tech companies that did come through the bubble intact are among the biggest companies on the planet.

“If you look back, survivors like Amazon and Google are among the most valuable companies in existence today,” he says. “It was way more important to pick the right companies than to predict the crash.”

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Mickelson comes from behind to win British Open

Congratulation to a “Class Act” – Well done

Steve DiMeglio, USA TODAY Sports 5:17 p.m. EDT July 21, 2013

GULLANE, Scotland — As he wrapped up his practice session Sunday and started his march to the first tee, Phil Mickelson had a chat with his coach, Butch Harmon, who told his star pupil that even-par or 1 over could win the 142nd edition of the oldest championship in golf.

“I’m going to be better than that,” Mickelson told Harmon despite the fresh breeze blowing in from the nearby hay fields and the Firth of Forth.

“He wasn’t lying,” Harmon said.

LEADERBOARD: 142nd British Open

No he wasn’t. Starting the day at 2 over and five shots behind — and one month after another heartbreaking loss in the U.S. Open — Mickelson made birdie on four of his final six holes on the brutally tough ancient links at Muirfield Golf Club to pull away from a tight pack stacked with the game’s best players to win the fifth major of his career.

HOLE BY HOLE: Mickelson wins it, Tiger fades

Under overcast skies on a course stiffened by 20 days of sunshine that created a culture shock for both locals as well as players, Mickelson fired a final-round 5-under-par 66 — matching the low round for the week — to finish at 3 under and top Henrik Stenson (70) by three.

EMOTIONS: Mickelson shares moment with family

Four back were late-charging Ian Poulter (67), overnight leader Lee Westwood (75) and Masters champion Adam Scott (72), who made four consecutive bogeys on the back nine for the second year in a row in the British Open to cost him dearly.

TIGER WOODS: Major drought continues

Tiger Woods (74) finished in a tie for sixth.

“This is the greatest feeling I’ve had in the game,” said Mickelson, 43 years young who, you recall, went through 42 majors before winning his first in the 2004 Masters. “It’s probably the greatest round of my career.

” … I never knew if I would win this tournament. I hoped, but I never knew it … until about an hour ago.”

He won’t get any arguments that it is his greatest round from Zach Johnson, who said after tying for sixth that he didn’t see a 66 out there. Nor will he get opposition from his wife, Amy, who along with the couple’s three kids, was in step with Mickelson on the back nine. Nor will you get a rebuttal from his caddie, Jim “Bones” Mackay, who had tears in his eyes walking off the 18th and choked up talking about his friend after the round.

“When you work 21 years for a guy it’s pretty cool to see him play the greatest round of golf he’s ever played in the last round of the British Open,” Mackay said. “He hit it great, he putted great. … The guy has done a lot of really cool things on a big stage. He wants to be on the big stage, wants to hit big shots when it matters. Today he did that.”

While Mickelson, who moved to No. 2 in the world with the win, made his breakthrough in the British Open to add the Claret Jug to his three Masters titles and a win in the PGA Championship, world No. 1 Woods remained stuck on 14 majors. He now has made 17 starts in a major since winning his last in the 2008 U.S. Open at Torrey Pines. Another maddening weekend when he shot 72-74 hindered his chances.

“I’ve won 14 and in that spell where I haven’t won since Torrey, I’ve been in there. It’s not like I’ve lost my card and not playing out here,” said the four-time winner in 2013. “So I’ve won some tournaments in that stretch and I’ve been in probably about half the majors on the back nine on Sunday with a chance to win during that stretch. I just haven’t done it yet. And hopefully it will be in a few weeks (at the PGA Championship).”

And it wasn’t a merry old time in England. Favorite son Lee Westwood, the overnight leader who was looking for his first major title in 62 starts, failed to hold on to the lead he took to the inward nine. Desperately hoping to join the brilliant British Summer of Sport that has seen Andy Murray crowned the king of Wimbledon, the British and Irish Lions rugby squad win the tour series in Australia, and Chris Froome becoming the second consecutive Brit to win the Tour de France, Westwood stumbled with his usually superb iron play.

“I keep putting myself in contention,” said Westwood, who notched his eighth top-three finish in a major since the start of 2008. “I didn’t do a lot wrong today. I just didn’t do enough right. I know what I’ve got to work on.”

Mickelson hasn’t done much wrong for a while now, in large part because he works so hard on his game despite the steady march of age. He has three wins this season, winning the Waste Management Phoenix Open and last week’s Scottish Open, another triumph on a links course in Scotland which began putting to rest the criticism he heard about his poor play in the cradle of golf.

Despite his record sixth runner-up finish in the U.S. Open at Merion Golf Club near Philadelphia, which left him stung and hurting, Mickelson felt at ease all week. Despite a course baked to look like a tarp of charred hash browns, running Brickyard fast with pin placements that had players banging their heads in frustration, including Mickelson after the first round.

“You have to be resilient in this game because losing is such a big part of it. And after losing the U.S. Open, it could have easily gone south,” Mickelson said. “But I looked at it and thought I was playing really good golf. I had been playing some of the best in my career. And I didn’t want it to stop me from potential victories this year, and some potential great play. And I’m glad I didn’t, because I worked a little bit harder.”

Mickelson said he had to compose himself and slow his roll down the 17th fairway after hitting what he called the two best shots of the week — 3-woods to get home in two on the par-5. It was then he realized the title was his to lose, and he made sure not to stumble, calmly two-putting for birdie from 45 feet and then adding another birdie from 12 feet on the last.

Clutching the Claret Jug, Mickelson relished in joining an eye-popping list of winners at Muirfield, where members of the World Golf Hall of Fame have won 14 of the 16 Opens hosted by the club, including Gary Player (1959), Jack Nicklaus (1966), Lee Trevino (1972), Tom Watson (1980), Nick Faldo (1987, 1992) and Ernie Els (2002).

He was equally proud of mastering links-style golf a second week in a row, winning his first Open in 20 campaigns.

“The conditions and the penalty for missed shots in the Open Championship are much more severe … and it took me a while to figure it out, I would say,” Mickelson said. “It’s been the last eight or nine years I’ve started playing it more effectively. I always wondered if I would develop the skills needed to win this championship.”

It is the measure of a man, one could say of Mickelson, that despite his enormous success he still searches for what he doesn’t have. Presently, that’s a U.S. Open title to complete a career Grand Slam, won only by Woods, Nicklaus, Player, Ben Hogan and Gene Sarazen.

“I think that if I’m able to win the U.S. Open and complete the career Grand Slam, I think that that’s the sign of the complete great player. I’m a leg away. And it’s been a tough leg for me,” Mickelson said with a laugh, alluding to his misfortune in the national championship. “Those five players are the greats of the game. You look at them with a different light. And if I were able to ever win a U.S. Open, and I’m very hopeful that I will, but it has been elusive for me. And yet this championship has been much harder for me to get.”

But he’ll keep trying, Mackay said.

“He looks forward. He works hard. How many people are going to build a practice facility in his yard post-40? He wants it,” Mackay said. ” … He’s stronger than he’s ever been, he’s fitter than he’s ever been, and he’s hungrier than he’s ever been. And you can’t understate how much he wants to compete and do well. When he’s 60-something years old he’s going to be on the putting green at Augusta thinking he has a chance. That’s just how he is built.”

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Article by John Backus, Partner New Atlantic Ventures

“Much has been written about the explosive growth of smartphones and tablets, but apps are what make them useful and are driving their adoption. IDC estimates mobile app downloads will reach nearly 182.7 billion in 2015. There are now nearly one million apps, mostly for Apple and Android devices, and Gartner projected app revenue from app stores alone will reach $58 billion by 2014. Apps are big business.

But this sheer volume of apps creates real complexities for app developers and consumers alike. As a developer, how does your app stand apart from the pack? As a consumer, finding the right app is like looking for a needle in a haystack.

Conventional wisdom suggests that search is the answer. Chomp, Quixey and even Yahoo! let you discover apps through search. Others are trying to help you search for apps with various algorithms, through social networks and games.

I disagree with this this entire approach.

Search is not the answer for app discovery – finding the top apps is serendipitous.

We find our best apps today by talking to our friends at a restaurant, by reading about them in a blog or an article, or by stumbling upon them on a recommended or top ten list.

Not a month goes by when an entrepreneur I meet, developing a smartphone app, can’t quite answer a simple question: How will you market your app to your customers? All too often the answer lies somewhere between “Apple is going to feature my app,” and “I’m going to advertise it in other apps.” Neither is a compelling answer, nor likely to help developers build a big business.

We’re placing a big bet, alongside VC media giant, Syncom, that serendipity will drive the app discovery process. That’s why we invested in Apptap. Similar to what an ad network does today, serving you ads based on the content of the web page you are viewing, AppTap serves you apps to consider, based on that same content.

A USA Today online reader, browsing an article in the sports section, is likely interested in seeing sports-related apps. A visitor to TUAW (The Unofficial Apple Weblog) is likely to be intrigued by cutting edge Apple iPhone or iPad apps, but not by an advertisement on basket weaving. A Pandora iPhone listener, on the other hand, is likely not interested in clicking out of Pandora to check out a flashing app advertisement.

So if you are a developer, quit trying to trick customers into downloading your app via incented downloads. Don’t run random app ads, it is too reminiscent of early run-of-site banner ads. And don’t think that hoping to be featured in someone else’s app store is a good strategy.

Instead, put your app where your customers are likely to discover it, and you will be well on your way to growing your audience with users actually interested in your app.

Originally published on the Huffington Post, January 13, 2012. Follow John on Twitter @jcbackus”

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Here is a good piece from FierceMobileContent

Social networking is now the most popular web activity, surpassing even email, according to a new study issued by information and media firm Nielsen. Active reach in what Nielsen defines as “member communities” now exceeds email participation by 67 percent to 65 percent, the firm reports–among all Internet users worldwide, two thirds visited a social networking site in 2008. Facebook now leads the pack: Three out of every 10 web users visit the site at least once a month, and in all, Facebook experienced a 168 percent increase in users in 2008, galvanized by growth among the 35-to-49 demographic.

Mobile social networking is most popular in the U.K., where 23 percent of mobile web users (about 2 million subscribers) now visit social networks via handsets–the U.S. follows at 19 percent, or 10.6 million subscribers. Mobile social networking usage increased 249 percent in the U.K. in 2008, and grew 156 percent in the U.S. Nielsen notes that the most popular social networks via PCs and laptops mirror the most popular services on the mobile web–Facebook is the most popular in five of the six countries where Nielsen measures mobile activity, with Xing proving most popular in Germany. In addition to the mobile web and dedicated mobile social networking applications, users are also interacting with their social networks via SMS–according to Nielsen, at the end of 2008 almost 3 million U.S. users were texting Facebook on a regular basis. For more on social networking’s growth: – read this Nielsen report

Related articles: Social networking tops mobile search queries, Facebook in mobile social networking talks with Nokia

Other blog  comments: techblips, USA Today

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