The Sound Of Silence
Regular readers might have noticed that I didn't post yesterday. That's a rarity for me. Typepad tells me that I have made 4,744 posts since I started blogging on September 23, 2003 (this blog had its sixth birthday this past week which I failed to notice). That math works out to 1.2 posts per day.
I like to keep this blog fresh and it bugs me when there is a day old post at the top. But yesterday was one of those rare days when I didn't have anything to say. Part of it was that I had spent most of the day on a plane flying back from London, part of it was that I arrived to an onslaught from journalists and bloggers who wanted to talk to me about Twitter, and part of it was that I had a ton of stuff I needed to do when I arrived home. So no blog post yesterday.
In addition to not saying anything on this blog, I also had nothing to say about the Twitter financing. That annoyed a lot of people who were writing about it yesterday. But I don't think financings are particularly interesting to talk about. I like what Twitter had to say about the financing:
There's a lot of talk today about our financing. Yesterday we closed a
significant round of funding with a group of investment firms that
we're excited to publicly thank: Insight Venture Partners, T. Rowe
Price, Institutional Venture Partners, Spark Capital, Benchmark
Capital, and Morgan Stanley.
It was important to us that we find
investment partners who share our vision for building a company of
enduring value. Twitter's journey has just begun and we are committed
to building the best product, technology, and company possible. I'm
proud of the team we've built so far and I'm confident in the future
we'll build together.
That is the whole post. And it is probably one of the shortest posts on the Twitter blog in my memory.
The truth is financings are important to keep the company funded but they are not achievements in their own right. I like that Twitter's post acknowledges that.
So that explains my silence yesterday. I really had nothing to say. I feel the need to speak coming back already and have some good posts rumbling around in my mind this morning. So stay tuned in to this channel. I promise we won't have too many blackout days like yesterday.
Financings appear very much to be “achievements in their own right”. In this case, it seems to signal to an industry ready to jump on any news of Twitter’s business planning, that they persuaded these investors that they have very good uses for $100M… uses that will significantly increase their value.I think people have a hard time believing that Twitter got very far with, “Could you guys give us $100M to ‘keep the company funded’?”
If more people understood that finance (and for that matter, all of Wall Street) was about giving people the ability to make something incredible and not a very interesting product unto itself, our economy would be a lot stronger right now. At least that’s what this bitter engineer toiling away in a machine shop at 3am on a Friday night would like to believe.
So there’s nothing to read in the fact (?) that USV was one of the few early Twitter investors that didn’t participate in the latest round?And you’re absolutely right that “financings are important to keep the company funded but they are not achievements in their own right.”
1.2 original posts per day is a prolific average for a non-professional blogger. You shouldn’t get too stressed about taking a day off.Re the Twitter financing announcement, I get your point about financings not being achievements in their own right, but they can still be notable as an indication of institutional investor enthusiasm for a particular sort of venture. I suspect much of the commentary comes from that angle.
No doubt you’ll come back strong. Plus, Gotham Gal stepped up and has been killing it with a mad flurry of great posts that have me checking her blog first now. Uh oh, Fred. ; )
yup. she is seriously killing it right now.
Is it possible to explain to us the rationale behind USV not being part of this Twitter financing round? Thanks.
It’s very unlikely Fred will respond to any of these questions, but I can think of a few reasons right now off the top of my head:1.) According to the New York Times article, post-money valuation puts Twitter at 1B for the 100M investment. In order to make a significant change in their current equity holdings, they would need to pony up more than they are either willing or able to call up immediately, and it’s probably not worth while for them to do so anyway.And remember, USV & Charles River first entered on the investment back in July 2007 for somewhere between 1-5MM. Let’s say they both put in 2.5MM for 5MM total and the owner’s gave up 50% in equity for that investment, so USV back in July had a 25% ownership in the company. My guess is the actual breakdown was 20/20/60, but this will work for now.In Twitters last round of financing, the one where USV maintained their ownership position, the firm was valued at 250M post money for a 55M equity injection, 35 of which came from new investors.We don’t know if Charles Rivers maintained, but we do know USV did. I don’t think it is likely USV gave up 20M in a single round with so many participants, so I think it’s possible they gave up 10M to maintain their position back in February, which is a lot of crackers for a small fund (assuming USV doesn’t employ leverage). At this point, USV has laid out 12.5M in cash in two investments and they have a 25% ownership.So, move forward to today.The new investors put in 100M with a post money valuation of 1B. Two of the participants came in from the February round, not that this matters. Let’s say USV has this 25% of equity in the company at this point and they want to maintain. By my best guesses, this would cost them nearly 100M to do so. If they do nothing, they still have a 22.5% of post money shares. Basically, even if they invest 10M at this point, they are going to have an extremely small impact on their total ownership. Their investment at this point is looking pretty good.Using my above numbers, let’s say they exit at December 01, 2010 at the present valuation of 1B. This is an IRR of 2,684%, which is a pretty good return by any standard.You can fudge around some of those numbers, but you still end up with a massive IRR at the end.2.) It may not fit into USVs strategy. I haven’t read Fred’s PPM but I think he has billed this current fund as a smaller fund with a strategy of early investing. By the looks of the participants and given the size, this is a much later stage investment. Maybe they are gearing up for their final push towards IPO or maybe they are looking for a firm with extremely deep pockets and they want to bolster the balance sheet a little with some cash.I’m not sure the company is ready for ether, given that, as far as I know, the company is still red EBITDA and still has architectural issues regarding the scalability of their product. So I can only assume they are on the verge of something big and they are riding the hype machine.3.) It’s too risky at this point. Let’s face it, this valuation is almost certainly riding a hypewave and for a company with no cashflow, that’s not exactly sustainable. Who will buy the company? The only good fit I see is facebook and they need to wait for their IPO to wrap up before they even think about inking a deal of this magnitude. So what is the future for the next couple of years on negative cash flows? The future looks murky. I think we are well past the stage of “let’s build something cool and we can figure out a business model later”. But, who knows, maybe this new capital is going to generate this cash machine that will make an MBA weep.
I was looking for someone to reverse-analyze the various rounds, and thanks for doing that and more.It does look like USV is sitting pretty on this one, and they didn’t really have to participate because their upside is already looking very good.
Fred, you are allowed a day off. Not only that, but I agree with you about financings. Here in AZ, where we have very little VC money, everyone talks about money, money, money all the time, and how everything would be hunky dory if we just had more of it. I don’t believe that. I have connections to plenty of people with money, including you, and I never go to them and make introductions because I seldom have a company I know is good enough to benefit from venture capital by becoming an enduring business.We have become too focused on the role of money in growing a business. People forget that Twitter proved they had a very large market before the money flowed in. The money does not come first; and it doesn’t come last. It ideally comes in the middle, after there’s a real company (not just two guys with an idea or even a prototype). And there has to be a need for the money to GROW the business, not just start the business. Innovation should start the business.Sorry. I have said this so many times that it just barfs out no matter who I’m talking to. I know you know this. I’m just trying to agree with you that financings are not as interesting as, say, customers.
I’ve only been reading your blog for about 2 months so I’m not sure all topics you have covered. Ever mention Meebo in any of your posts? I find this an interesting company…
according to lijit, i’ve mentioned meebo three times on this bloghttp://bit.ly/ER1nz
look at you citing another piece of software…ballin!
Congrats on six years. I started reading within the first week or two, when Nick Denton recommended you as a writer. It’s been a lot of fun learning with you and the people who congregate here, and as I’ve said before, I’ve been able to translate much of this information into useful talks for my industry. And the music recs are fun, too. Miike Snow is so right now. It is hard to get that album out of heavy rotation, eh?
I tried to see miike snow last week in nyc at a fashon week show but they didn’t show. Bummer
Congrats, that’s a great posting average. Even with *just* a tumblelog, I slip into days on inactivity at a time — and i think most people would still consider me quite prolific.What are the stats on fredwilson.vc? I bet they’re even more impressive.Re: twitter and financing, I agree. While a first round financing really does signify an achievement and deserves some insight (and link love), at this stage a simple blog post like twitter wrote is more than sufficient.
I post a song a day on tumblr so its at least 1x per day. My bet is it is greater than 2x
Take the number of posts on http://www.tumblr.com/activity divided by 781(days since your first post on tumblr — 8/7/07).Of course it’s skewed since you used to import a bunch of feeds, but I’mimagining it’s a massive number.
tumblr says 4308 posts to date (almost as many as here in 1/3 the time) so its more than 5x per day on average. wow.
i’ve said it before, i’ll say it again: fred wilson is the cal ripken jr of the blogosphere. in true blog star form, fred shows up daily.glad to see you sticking up for yourself and counter-dissing those who dissed you for not talking about the twitter financing. way to go boss!
I prefer the James Brown analogy. After refreshing AVC a few times yesterday without a new post I had pictured Brad or Andrew running out from stage-left with a sequent cape.
What’s a sequent cape?
I assume he meant to write sequined cape, i.e., a cape covered with sequins.
In line with your Urban Architects Post…another reason to continue feeling the love from the Bay Area. http://www5.sfgov.org/sf_ne…
Fred, it’s Saturday in NY. Do something that makes the city the best place to be, like a walk in the park and taking in the new Georgia O’Keeffe exhibit at the Whitney http://www.nytimes.com/2009…
Or sell pickles to mike bloomberg! He bought some ricks picks at the greenmarket in union square this morning
Way better than THIS PAGE INTENTIONALLY LEFT BLANK:-)
Seems like you have a great opportunity to explain why a fund of your size can’t follow-on at $1B valuation and how you plan to stay involved in the company while some of these big machers start positioning for influence.
i have been reading and participating in the discussion for some years now – its a great blog – even if you do take a day off. congrats on 6 years and an amazing ‘put out’ rate.
In “I’d Like the World to Buy a Coke” Roberto Goizueta lays down three simple rules for business success:1. Set expectations2. Meet or exceed them3. RepeatFred, you have set our expectations for both frequency and quality of your posts *very high* – I find it fascinating that you continue to exceed them every day. Congratz and thanx for that!
It doesn’t sound like you had anything to say today either.
not sure i agree with that based on this comment thread
And in the naked light I sawTen thousand people, maybe more.People talking without speaking,People hearing without listening,People writing songs that voices never shareAnd no one daredDisturb the sound of silence.
There’s nothing better than an inspiring dream or reading a thought provoking blog post to get my ideas flowing. When your Muse returns, we’ll be ready to tune in (thank Michelle for typing this).
It’s your blog, you get to talk about anything you want, or NOT talk about anything you want. :)Another way to look at it . . . you gave 100’s of commenters the day off.
I would comment but I don’t really have anything to add.
very funny steve
Great point. I don’t understand the celebration that follow getting funding. Funding doesn’t get you customers. It doesn’t make you profitable. It keeps the doors open.
The funding of Twitter was expected…..What else would they have done? It just makes sense…the amount of publicity they get, its basically the first New Media broadcast play (imagine investing in radio when it first came out or TV)….so big investment with a concept that is game changing. Let’s see who buys them out or how they execute…that’s the real question!
A) The Title makes me want to sing Simon and Garfunkel. “Hello Darkness My old Friend”B) Ok, it’s sometimes good to be quiet. I’ve learned a lot by both trying to particpate and being quiet. Even though you write every day, (don’t take this personally), I like the quieter days (though yesterday was wierd I admit) It allows threads to get long, and you learn more from them. Sometimes quiet is good.C) Good luck with Twitter, there is way too much stuff out there discussing it. You’re on the mark that a lot of people are writing about that. It gets old….lets move on.
Somewhat sad Fred that you have to apologize for not posting. Introspective exceeds expectations. Never a good balance.
I wouldn’t call it an apology. I’d call it an explanation and an extrapolation
When I clicked here on Friday, I wondered if I’d see a post from Fred about this faux press release about venture financing from 37 Signals. I’m a relatively new reader here though, so Fred may have blogged about similar posts from the guys at 37 Signals in the past.Interesting coincidence though that the Twitter financing announcement was bracketed by that 37 Signals post on Thursday and Tyler Brûlé’s anti-Twitter Fast Lane column in the FT on Saturday. The ironic thing about Brûlé’s criticisms of tweeting is that his columns are often essentially a collection of tweets in column form. E.g., Brûlé mocks commuters tweeting about something they see on their way to work; this from a man who once wrote a newspaper column about ordering a club sandwich in a hotel.
One of twitter’s greatest assets is that it is so easy to diss it
That sounds almost like a Zen koan. It would be interesting to read your explication of it.
if all press is good press, and if media comes from everyone now, then the most ridiculed service is also the most talked about one
You get so many comments to your blog, it seems like you need to take off a day every so often just to allow for some thoughtful digestion.Even when you don’t write, the wisdom never stops because your audience — which you have lured and ensnared — keeps the ball rolling!Don’t feel any pressure to write. I would rather have an ounce of caviar than a truckload of peanut butter — figuratively speaking of course.BTW, I do think that financings are a big deal and should be celebrated just like birthdays. You are building companies — and why not GREAT companies? — not just products and great companies require gobs of money. It is useful to know that folks are voting with their checkbooks from time to time.”unrewarded genius” as Silent Cal would say?