Is the tech bubble (finally) popping?

I don’t consider this to be a tech blog by any means, but I have, from time to time, touched on technology, particularly as it relates to start-ups. I wrote a couple of months ago about Facebook’s acquisition of Instagram, and have been emphatic in my disdain for Groupon. I used the B-word – bubble – to describe the state of the tech industry in that first Groupon post, and have also used it on Twitter and in-person with some regularity. Suffice it to say, I believe the current spate of billion dollar valuations for companies with no revenue model (or one derived solely from “ads” and no long term pain alleviation) indicates that we are in a bubble.

Or maybe we were in a bubble that has since popped against the sharp and unforgiving spear of the public markets. In the last year, half-a-dozen or so of Silicon Valley’s social media darlings decided to take their ad-driven business models (and their Ponzi-esque need for shareholder liquidity) to the public markets. What have those companies been up to since their (in most cases) much-ballyhooed IPOs? Let’s check it out.

I’m beginning to think I’m accident prone

Since I always post here when I have noteworthy injuries, I’m somewhat obligated to write this one. This weekend, my mom’s side of the family had a reunion in Olney, MD (about 45 minutes away from Frederick, which reminds me – full update post on the new digs coming soon). Yesterday’s designated activity was a pool party, which was, overall, a blast (barring one cousin who’s just getting “man” strength but still has a boy’s mind, and thus had me in a full headlock under water for about 30 seconds before I realized he wasn’t actually going to voluntarily give me my life back).

Big news

Most people that will read this probably already know, but I figured I might as well announce it to the world: in two months time, Jackie and I will be leaving Louisville to move to the Washington DC metro area. I’ve accepted a job as VP of Finance at Regent Education, one of Chrysalis’ portfolio companies. Regent is an awesome company – great team, awesome market opportunity and loads of upside – and I’m honored and excited to join it.

That said, this wasn’t an easy decision – I’ve really enjoyed my work at Chrysalis and have learned a ton in the process. I’ve also been honored to work beside some amazingly smart and genuinely nice people. However, I’ve known for a while that I wanted to get some operating experience in a start-up company – I’m afraid I come by that naturally – and the opportunity at Regent was simply too compelling to pass up. A lot of the details are still up in the air – where we’ll live, for instance; any advice is welcome – but we’re slowly ticking items off the to-do list. Stay tuned for more. 

Terrible business descriptions

It’s one of the hazards of being a VC – you get a thousand business plans a year and at least a few of them are going to be unbelievably bad. Most of the time I keep these to myself, but I couldn’t resist sharing the following, as I thought the broker did a historically bad job of avoiding jargon in his description of the business:

Please find attached the tear sheet on [REDACTED].  Cool company, in the Remote Monitoring & Management space for IT Infrastructure assets and using an enterprise based SaaS model to ensure strong recurring revenues.

Keep in mind, VCs tend to be generalists – if you describe a business in an overly complicated fashion, they won’t understand it. And if we don’t understand it, we pass on it.

More adventures in tax policy

Last night, while reading the usually-solid Freakonomics blog, I stumbled upon an unbelievably naive piece of tax policy that I thought worth discussing. In a guest post, Robert Frank, author of The Darwin Economy, argues that “Charles Darwin, the naturalist, will unseat Adam Smith as the intellectual founder of economics” within the next century. What does he mean?

That case rests on Charles Darwin’s observation that competition favors traits and behaviors only when they promote individual success. Darwin recognized that, as in Adam Smith’s invisible hand theory, individual interests often coincide with those of larger groups. But not always. And when interests at the two levels conflict, individual interests generally trump, often resulting in wasteful arms races. My claim is that simple, unintrusive changes in tax policy can mitigate such arms races, producing enormous gains for everyone.

The massive antlers of bull elk illustrate Darwin’s point…Because relative antler size was often decisive in their battles for mates, mutations that coded for larger antlers spread quickly. The resulting arms race eventually stabilized. But although the modern bull’s huge antlers—which can span four feet and weigh forty pounds—promote individual reproductive success, they are an enormous handicap from the perspective of bulls as a group. When chased into densely wooded areas, they are easily surrounded and killed by predators. Bulls would fare better if each animal’s antlers were smaller by half. Every fight would be resolved as before, and each animal would enjoy greater mobility. Yet any individual with relatively small antlers wouldn’t leave any offspring.

OK, I follow so far. But how does this translate into actionable tax policy?

On the issue of taxes

There has been much ado, lately, about “raising taxes on the wealthy.” It’s become President Obama’s pet issue, embedded in his so-called “jobs bill” and presented to the public under the vague guise of having everyone “pay their fair share.” Warren Buffet has famously stepped up to support the President, writing an op-ed to the New York Times in which he asks a “billionaire-friendly” Congress to “stop coddling the super-rich.” The Republicans, in turn, have used the President’s generality against him, bemoaning generic “tax increases” while using the opportunity to take pot shots at the President himself (using ad hominem attacks to change the subject is of course a classic political tactic of which both parties are consistently guilty).

Back again…

July was a crazy month for me. Two vacations – one to Florida, one to Yellowstone – and an above average amount of business travel combined with personal happenings meant that July was anything but a slow month. But I’m back now, and August is off to a mercifully slow start, so hopefully will have more time to do some writing. In the meantime, here’s a bear I came face to face with in Yellowstone:

Why I’m shorting Groupon

In case you’ve been living under a rock for the last 48 hours, Groupon, the pioneer of the daily deals movement that’s overtaken e-commerce, has filed for a $750mm IPO that’s estimated to confer a valuation on the company between $15 and $25 billion. Much has already been written about the company and its impending IPO, but I thought I’d add my voice to the mix. In short (ha!), there are a number of things about Groupon’s business that make me wary of investing:

Take two

OK, so that didn’t work so well. Back again, though, with more ideas about how to make this a more regular occurrence.

What is Ouden Menei?

Note: When I first registered this blog – in January 2009! – I titled it “Ouden Menei” for reasons explained below. I still think it makes a great blog title for a classically-inclined person, but have instead opted for the simpler “WSCII” for the blog’s second incarnation.