DIGITAL SOUP

A blog by Barry Flanigan

The Private IPO

Yes, I realize that’s a contradiction, but it seems to capture the essence of deals such as Goldman’s investment in Facebook at a $50B valuation and Groupon’s half-complete $950 million fundraising effort.  These deals are designed to provide significant liquidity for insiders (especially early investors and employees), provide a piggy bank for continued aggressive growth and establish a share price for use in acquisitions.  Those are all the things that companies traditionally got from an IPO.  Much has already been written about these types of deals, but with two huge ones happening it seems timely to think a bit more about them.

These deals should really be a wake-up call to politicians and regulators.  They are a great example of how well-intentioned regulations can backfire.  The net result of the Wall Street research settlement, SARBOX and other protections for small investors has been: small investors now have no access to the most interesting investment opportunities.  Instead, these companies are going to be more or less fully developed by the time they eventually come to the public markets, with most of the upside having been captured by private investors.  That’s especially annoying when it seems that with the Internet we should be seeing IPO 2.0 — direct to small investors without the historic flip opportunity for well connected investors.

These deals also serve as a powerful reminder of macroeconomic conditions and the microeconomics of Internet businesses.  Despite some overall progress, the Internet is really the only sector, at least in the US, with a huge growth story.  Fixed income certainly doesn’t provide an attractive investment opportunity with US Government yields of less than 3% for anything under 10 years.  So it’s not surprising that there is a huge amount of money sloshing around and chasing the Internet opportunity.  Within that opportunity it is now clear that — at least for consumer facing businesses — there are “winner-take-all” or “power law” type economics at work, with the #1 company often being 10x more valuable than the #2, which in turn is often 10x more valuable than anybody else.

Finally, any private company that is in a leadership position in its space would do well to make use of this fundraising environment while it lasts.  These deals are beginning to look like the Internet IPOs of the bubble for another reason:  At valuations in the many billions, there is little room for error. If a couple of these wind up imploding it will take much of late stage financing out for some time.

http://www.businessinsider.com/the-private-ipo-2011-1

Filed under  //   social media   start-ups  

RootMusic Raises $2.3 Million To Help Bands Build Spectacular Facebook Pages

RootMusic, a San Francisco-based startup that essentially makes it easier for bands and musicians to set up phenomenal-looking pages on Facebook, has raised $2.3 million in financing according to an SEC filing.

If you’d like to learn more about RootMusic, check out Orli’s post, but basically, RootMusic lets musicians and bands establish fancy Facebook pages, featuring artwork, music, photos, videos, a concert calendar and whatnot.

There’s a free option and a paid option for bands who want to dive deeper into the customization of their so-called ‘BandPage’.

This is the BandPage for Tom Petty and the Heartbreakers if you’re interested in an example, or check out RootMusic’s tour.

We reached out to RootMusic about the financing round, but they declined to provide more details at this point. We’ll update their CrunchBase profile when they get around to do so.

RootMusic image

Website: rootmusic.com
Location:San Francisco, California, United States
Founded: October 1, 2009
Funding: $2.3M

We founded RootMusic to level the playing field; we turn two days of hard work into two clicks online. Whether it’s your band’s first gig or scheduling your second arena tour, RootMusic gives you the power to get it done. BandPage by RootMusic is the… Learn More

Information provided by CrunchBase

http://techcrunch.com/2011/01/05/rootmusic-funding/?utm_source=feedburner&utm...:+Techcrunch+(TechCrunch)&utm_content=Google+Feedfetcher

Filed under  //   Music   start-ups  

Europas award winners and finalists

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Begin forwarded message:

From: Barry Flanigan <bazflanigan@gmail.com>
Date: 18 December 2010 20:30:19 GMT
To: "harkable@posterous.com" <harkable@posterous.com>
Subject: Europas award winners and finalists

Good list of European startups from the Europas http://bit.ly/bJ3OCw

Filed under  //   start-ups