SpiderNet has recently been funded $10M in an A round by two venture firms in the Valley. As part of the funding, you agreed to think about bringing on a VP of Engineering, though you are uncertain when this might occur. Currently, the company co-founder manages the engineering organization. You’ve made no explicit commitment to the timing, only that the company would assess when a new VP engineering might be needed. You sense that the time is coming.

The engineering group has 10 people at this time, and the co-founder has very little engineering management experience. He’s done a phenomenal job of hiring super-smart folks, and the group is generally working quite well. However, the company needs to double the size of the engineering team over the next several months and you are not at all sure how well the co-founder will scale.

While the engineering team is doing well, you’ve noticed some issues in product quality and some slipped dates, but nothing terribly out of the ordinary. Some of the engineers have come to you to suggest that they want more process and leadership in the engineering organization. Right now there is little process or organizational structure, which is what you’d expect in a start-up.

The bottom line is, you have this gut feeling that when you double the size of the engineering organization over the next several months in preparation for your product release, things will not run very smoothly. You are pretty convinced that you are going to need to change things around, but are very unsure when and how to go about making the changes.

What now? Some things you consider…

• Do you put a new VP above the co-founder? Do you put a new VP under the co-founder? Do you have two in the box leadership? Do you create a new job for the co-founder?
• And when you make the changes, what reaction will the co-founder have? Will he still be motivated or will he pack up and leave? How do you approach him on the topic? How will this impact your company’s culture?

Chime in on the comments below, and tune in Friday for Peter’s answer.

Peter Levine has been a lecturer at both MIT and Stanford business schools and CEO of Xensource. Prior to Xensource, Peter was EVP of Strategic and Platform Operations at Veritas Software where he helped grow the organization from no revenue to more than $1.5 billion, and from 20 employees to over 6,000.

Here’s some electric weekend reading for those interested in the push and pull between venture investors and start-ups in the frothy Web 2.0 environment.

In an email to Airbnb CEO and co-founder Brian Chesky (which I obtained, embedded below), former Facebook exec Chamath Palihapitiya, who now runs an investment fund called the Social+Capital Partnership, is passing on participating in the recent $112 million round for the hot online rental site that was announced in July.

The deal — which values the company at $1.2 billion — has not officially closed yet, but includes venture firms such as DST Global, Andreessen Horowitz and others. Previous investors include Sequoia Capital.

Palihapitiya confirmed to me that it was his email and that his possible investment in Airbnb was small.

That said, his concerns center on how much voting control of new investors’ preferred shares the founders have in the latest round and also a $22.5 million cashing out, $21 million of which is going to those founders.

Another $9.6 million is being used to buy secondary stock from current Airbnb shareholders, who have to render parts of their vested stakes for the money.

Such wrangling between investors and entrepreneurs is not uncommon in Silicon Valley these days, as ever-dumber money chases ever-more-powerful geeks. But Palihapitiya’s email is a smart, reasonable and well-written argument to stop the madness.

According to sources close to Airbnb, the numbers that he refers to below are accurate, as is what appears to be an unusual level of voting control by its founders. Presumably, it is to protect the company from possible future sales on the secondary markets and to keep control with its founders as the number of investors grows.

In any case, the Palihapitiya email to Chesky is well worth the read (I have removed email addresses as a courtesy):

From: Chamath Palihapitiya
Date: Sat, 1 Oct 2011 11:16:05 -0700

To: Brian Chesky

Subject: Airbnb financing…

Brian,

Cc Marc, Reid, my deal team

Thanks again for giving me the chance to participate in your latest financing. I had a chance to review the docs at length yesterday and I wanted to follow up as, quite honestly, I’ve never seen a deal like this over ~60 investments I’ve done and I’m pretty concerned.

I’m all for getting the best valuation you can, minimizing dilution and maximizing control. We did this brilliantly at Facebook…all of our financings (except our first $$$ from Peter Thiel) were done not out of necessity but opportunity. As such, our investors had virtually no control and it resulted in a much better outcome. As we’ve discussed, I generally don’t believe investors add much to a success story and so minimizing their impact is a great strategy when you are onto something that is working.

This said, while several of these concepts are reflected in the current deal, there is one big thing that I am fundamentally against and violates my principles and will prevent me from participating in your round. When I saw that you guys were taking $31M out of the company, I didn’t think much of it as I just assumed it would entirely be via a secondary sale.

But as I understand the deal, it seems that you are doing only $9.6M in secondary and $22.5M as a dividend to common (of which $21M goes to you and your co-founders). I am really uncomfortable with this and don’t think its in the spirit of building a good, long term business. Effectively, it is a strategy that allows you guys to take money out of the business and not dilute yourself — I’m not sure why this is such a big deal when you guys are almost 90% vested and the financing is at $1.2B where your dilution is marginal. Further, it excludes many of the employees that probably have helped you and your co–founders get the company to this place as most of these folks probably don’t have any stock but have unexercised stock options and thus won’t get a dividend.

My basic principle on this stuff is that if you want liquidity, that’s fine, but you should make it available to everyone. Otherwise, no one should get it. Your current deal is the farthest away from this principle that I’ve seen in a while…this strategy has been done once before — at Groupon. We can see how “well” they are doing and how short term the investor community is now viewing their motives. I really think you can do better than this…and that you are better than this.

Separately, when you look at successful tech companies, it seems that dividends are an approach used by cash rich operations to distribute excess earnings — in fact, the most successful, cash rich tech company in the world, Apple, hasn’t issued a dividend and they have more than $75B in cash! Again, while I think Airbnb will be a good company, this is nowhere near the truth now — you guys still need to scale and build this thing for the future.

I really think you are onto something but I would implore you to not take the easy way out. Treat your employees the same as you’d treat yourself. Do things that you will be proud of and can defend to anyone including your Board, employees, prospective hires etc. In such a competitive hiring market, you are competing with not just your obvious competitors, but also any successful tech company who is also looking for great talent. A principle that treats your employees as well as you’d treat yourself is a huge strategy for differentiation, retention and long term happiness of the exact types of people you will need to be successful. In contrast, if you are viewed as self-dealing and shady, it will only hurt your long term prospects…

In summary, I’m passing on this financing because I strongly disagree with what’s going on. I’m not sure who advocated this approach but I did mention this to Reid [Hoffman, another Airbnb investor via Greylock Partners] last night and he was of a similar mind to myself and surprised this was the approach being taken. If you want some good advice — I would ask that you consider pinging him about different ways to think about going about the liquidity portion.

If you change your mind on how to close this financing, let me know and I’d love to reconsider. Otherwise, good luck and lets keep in touch.

Take care,

Chamath

In a blog it just posted, Groupon said its recently hired COO, Margo Georgiadis, “has decided to return to Google (her former employer) in a new role as President, Americas.”

She was only hired in April, just months before the company filed to go public. Georgiadis was previously VP of Global Sales at Google.

(Interesting way to get a better title at the search giant, Margo!)

Georgiadis was in charge of the company’s global sales, marketing and operations at the Chicago-based social buying service.

Sources said that the hiring did not gel on either side.

It might not be Georgiadis’ fault. She replaced Rob Solomon, who was in his job for one year.

And here’s another: PR hire Brad Williams, a longtime Silicon Valley communications exec, who was there and then gone in what felt like 23 minutes.

It seems Groupon does not like Silicon Valley types or, perhaps, vice versa.

Since its IPO filing, in fact, it feels as if it has been a non-stop circus disaster at Groupon.

That has included immense controversy about its sketchy accounting, huge slugs of venture funding going to its founders and a lot of worries about its growth.

Today, in a Friday late afternoon dumping of bad news in hopes that no one notices (I do), Groupon also amended its S-1 public offering filing once again to change revenue metrics and also add a controversial internal letter that CEO and co-founder Andrew Mason sent to employees to counter its many and growing critics.

There appear to be many more shoes dropping soon, said sources, so stay tuned.

Until then, here’s the whole and very terse — for Mason — post:

Update on the Groupon Team

As a fast-growing company, we’ve done a lot of hiring this year, including on our senior executive team. Since the beginning of this year, we’ve made a total of 8 additions — that’s 57% of the total executive team. It would have been great if I could say that we batted 1,000%, but that’s rarely the case; after five months at Groupon, Margo Georgiadis, our COO, has decided to return to Google (her former employer) in a new role as President, Americas.

We’ve built a fantastic team that has proven itself highly capable, so this change won’t have an impact on operations. In fact, we are using it as an opportunity to reorganize in a way that reflects our evolving strategic priorities. Sales, Channels, International, and Marketing will now report directly to me.

Here’s a note from Margo: “Groupon is a great company and I feel privileged to have worked there even for a short time. It was a hard decision to leave as the company is on a terrific path. I have complete confidence in the team’s ability to realize its mission.” We wish her well.

It has only just announced its IPO plans, but Groupon is already getting a bitter taste of the brutality of being more public in an increasing series of negative reports aimed at its business prospects and execs.

That has included a spate of posts after it filed to go public last week about the unusual accounting treatment in an S-1 regulatory filing for the offering, which also showed a large outflow of its venture funding to the pockets of the Chicago-based social buying site’s founders.

Since then, though, the gloves seem to be off for Groupon, just as it starts to market itself to Wall Street investors.

Perhaps the toughest so far has been one written by Fortune’s Kevin Kelleher, painting a very sketchy investing portrait of the company’s Chairman and co-founder Eric Lefkofsky.

Wrote Kelleher in a piece titled “The Checkered Past of Groupon’s Chairman”:

But Groupon’s IPO has brought an uncomfortable spotlight onto Lefkofsky. While some attention focuses on his ambitions as an investor in tech start-ups, others see a “spotty history” and draw parallels between the past and the present. Lefkofsky’s track record, reflecting failures and successes, bears certain hallmarks: Rapid revenue growth accompanied by big losses, a penchant to sell stock early on, and lawsuits filed by investors, lenders or customers who feel they have been wronged.

Ouch.

While one of the lawsuits mentioned in the piece was dismissed with prejudice, it did not help that the piece included an early email used in the case, written by Lefkofsky in the Web 1.0 era, that read in part:

“Lets start having fun…lets get funky…let’s announce everything…let’s be WILDLY positive in our forecasts…lets take this thing to the extreme…if we get wacked [sic] on the ride down-who gives a shit…THE TIME TO GET RADICAL IS NOW…WE HAVE NOTHING TO LOSE…”

Double ouch, even if it is probably a bit unfair to use such rookie remarks from a young entrepreneur back then to reflect on him today.

Still, Lefkofsky — whom I met with recently at Groupon’s HQ and found as whip-smart and savvy as any Silicon Valley sharpie — does seem to need to be more circumspect in his utterances today.

Most specifically, the day after its IPO filing, he told Bloomberg in an interview that Groupon will be “wildly profitable,” referencing worries about losses unveiled in its financial statements and his past record of start-ups.

Said Lefkofsky on June 3:

“I’m going to be in technology for a long time. I’m going to start a lot of companies. These are not sham companies. These are great businesses. InnerWorkings is profitable. Echo is profitable. Groupon is going to be wildly profitable.”

While sources said it is unlikely that Groupon will be forced by the Securities and Exchange Commission to make a new filing due to the remarks, it’s just the kind of mistake the typically voluble company needs to avoid going forward.

In other words, no more words from Groupon.

A Chicago boy is going home, as former Yahoo PR exec Bradford Williams takes over as VP of Global Communications at Groupon.

Williams, who worked at Yahoo during its ugly takeover fight with Microsoft, will need his even-keeled personality more than ever now, as the social buying phenom heads into its upcoming IPO.

Groupon has gotten a lot of flack for the unusual accounting in its recent S-1 public offering filing, as well as for the huge amount of money that some of its founders have taken out of the company.

And its CEO Andrew Mason is also, well, somewhat of a death-staring character.

Williams has longtime tech experience, having also worked at VeriSign, eBay and Gateway.

He is one of many former Silicon Valley hires that Groupon has made of late, including several from Yahoo and also Google.

(By the way, that’s me calling on the other line, Brad, so get ready to pick up a lot.)

Sue Gardner, executive director of the Wikimedia Foundation, which operates Wikipedia, says it is just recently that the site has gotten itself on sustainable financial footing, and has become widely accepted as a useful, quality resource.

We stopped by the nonprofit’s San Francisco headquarters, which is located amidst a sea of tech companies in the city’s SOMA district, on the eve of the big anniversary, which Wikipedia is celebrating with a set of relatively mellow user meet-ups around the world.

Gardner spoke about the evolution of Wikimedia as an organization, and set out its goals for the coming years. We videoed the part of the interview where she sets the scene for the 10th anniversary.

Wikipedia is coming off a successful grassroots fundraiser, where it was able to raise $16 million from users, in part due to founder Jimmy Wales’s face greeting users every time they visited the site until the end of the campaign. That’s double the amount raised in a similar campaign the year before.

And over the last 18 months, Wikimedia orchestrated a wide-scale community discussion of its strategy, aided by collaboration expert Eugene Eric Kim, which resulted in a set of goals to take the organization and its many volunteers forward.

Wikipedia now has cumulative 380 million edits, resulting in 17.8 million articles in 250 languages by eight million user accounts, of which about 100,000 edit at least five times per month. It has 52 people in its San Francisco headquarters, which Gardner took over in 2007.

The nonprofit’s three-part mandate is to increase Wikipedia participation, quality and reach. Its big focus for the coming year will be reach, according to Gardner, specifically targeting poorer areas of the world where Wikipedia has so far proved to be less popular.

The idea, said Gardner, is that if people in these places have the tools and exposure to contribute to Wikipedia, the resulting content will be better representative of the world, as well as more comprehensive.

“You can’t blame editors for not being representative,” said Gardner. “The way to solve this is not to make them feel bad.”

A major implementation of the initiative will be opening a Wikimedia office in India in the next couple of months. Gardner had just recently returned from a trip to India when we spoke.

Meanwhile, Wikimedia’s product team is also working to redo its registration and discussion tools, and future projects include a better system for understanding user reputations.

The company has also started a campus ambassador program at colleges, which Gardner said is promising in part due to the folks who have turned out so far. Unlike with Wikipedia, where 87 percent of contributors are men, the campus ambassador volunteers were 50 percent women.

Another college effort is a program with 25 public policy classes to improve the Wikipedia pages on a particular subject matter.

And on the infrastructure front, Wikimedia is finally moving its data center out of the hurricane zone in Florida to a dedicated space in Virginia. The nonprofit is also looking to cache the site from more locations (it currently does so in Amsterdam) so it can be more quickly accessible in more parts of the world.

]]> http://allthingsd.com/20110114/happy-10th-birthday-wikipedia-whats-next-video/feed/ 0 http://allthingsd.com/20101112/after-imeem-ends-on-bum-note-founder-back-with-new-venture/ http://allthingsd.com/20101112/after-imeem-ends-on-bum-note-founder-back-with-new-venture/#comments Fri, 12 Nov 2010 21:58:19 +0000 Ty McMahan http://voices.allthingsd.com/?p=32494 Investors often talk about the importance of a founder having previous start-up experience. Dalton Caldwell’s last start-up certainly was an experience.

He founded online music service Imeem Inc. in his apartment and watched it grow to 95 employees and raise more than $25 million in venture capital. Then he watched it fall apart, selling to MySpace Inc. for a reported $1 million.

“It helps to have some sort of track record and be able to talk about lessons learned,” Caldwell said.

That experience was enough to attract one of the hottest venture capital firms in the game to Caldwell’s new business, Mixed Media Labs Inc. Andreessen Horowitz backed the company in a $5 million Series A round, with Marc Andreessen joining the company’s board.

“It’s great to work with Marc,” Caldwell said. “I met him a few times over the years at conferences and I’d come up with any idea just to talk to him.”

Read the rest of this post on the original site

]]> http://allthingsd.com/20101112/after-imeem-ends-on-bum-note-founder-back-with-new-venture/feed/ 0 http://allthingsd.com/20101108/heres-a-better-name-for-rockmelt-the-facebrowser-plus-boomtowns-two-dude-video/ http://allthingsd.com/20101108/heres-a-better-name-for-rockmelt-the-facebrowser-plus-boomtowns-two-dude-video/#comments Mon, 08 Nov 2010 17:08:02 +0000 Kara Swisher http://kara.allthingsd.com/?p=36906

At the end of this video interview with BoomTown about RockMelt–a new social browser that debuted in beta last night via yet another broken news embargo (thus, I have just joined the army of TechCrunch’s Michael Arrington on this irksome issue)–the two founders politely tried to gloss over my calling it a “Facebook browser.”

Except, um, it is.

Sure, as Eric Vishria and Tim Howes correctly note, there are Twitter and other news apps present. And I even like the mantra for RockMelt, which “re-imagines the browser around friends, feeds, and sharing.”

But that would be–for the most part right now–friends on Facebook, feeds from Facebook and sharing with Facebook.

In fact, the whole shebang is essentially–as you can see from the screenshots below–a big wet kiss to Facebook.

Still, RockMelt certainly could cause a bang, since it is funded by Marc Andreessen, via his venture firm Andreessen Horowitz–along with a passel of Silicon Valley luminaries such as longtime exec and mentor to the tech stars, Bill Campbell.

Andreessen, of course, is the legendary entrepreneur who invented the browser and founded the first commercial Internet company–Netscape–16 years ago. (He is also, coincidentally or not, on the board of Facebook.)

Still, with all its pluses, the Mountain View, Calif.-based RockMelt could have a hard time breaking through the crowded browser software market to reach consumers.

Microsoft now dominates the market with its Internet Explorer, followed by other big players, such as Google’s Chrome, Apple’s Safari and Mozilla’s Firefox.

While not the first browser focused on social networking–that would be Flock, which is still around–RockMelt is trying to distinguish itself using these now-popular and innovative services.

You sign on to it using Facebook, natch, and the friends you choose are arrayed down one side vertically, while news and other apps are on the other.

It’s built on Google’s Chromium open source technology, which makes RockMelt a truly Silicon Valley creation.

It will be interesting to see how RockMelt does with its powerful and myriad social connections, but until we find out, here are Howes (who once worked at Netscape) and Vishria talking about their plans:

And here are the screenshots of RockMelt (click on the images to make them larger):

]]> http://allthingsd.com/20101108/heres-a-better-name-for-rockmelt-the-facebrowser-plus-boomtowns-two-dude-video/feed/ 6 http://allthingsd.com/20100827/addressing-the-lack-of-women-leading-emerging-tech/ http://allthingsd.com/20100827/addressing-the-lack-of-women-leading-emerging-tech/#comments Fri, 27 Aug 2010 17:51:47 +0000 Shira Ovide http://voices.allthingsd.com/?p=28908 Female technology executives increasingly are banding together to solve what they say is a problem in their own midst: a dearth of women in top positions at emerging tech firms.

Only about 11% of U.S. firms with venture-capital backing in 2009 had current or former female CEOs or female founders, according to data from Dow Jones VentureSource. The prestigious startup incubator Y Combinator has had just 7 female founders among the 102 firms it has funded.

The “where-are-all-the-women” meme is a familiar one, and not confined to the technology world. But in start-up land, where the good idea is supposed to trump social status and everything else, the lack of women in positions of authority stands out.

Read the rest of this post on the original site »

]]> http://allthingsd.com/20100827/addressing-the-lack-of-women-leading-emerging-tech/feed/ 0 http://allthingsd.com/20100719/dsts-alexander-tamas-talks-about-new-investors-new-investments-and-dealing-with-troubling-russian-stereotypes/ http://allthingsd.com/20100719/dsts-alexander-tamas-talks-about-new-investors-new-investments-and-dealing-with-troubling-russian-stereotypes/#comments Mon, 19 Jul 2010 18:15:07 +0000 Kara Swisher http://kara.allthingsd.com/?p=30699

After Russia-based Internet investor Digital Sky Technologies got $388 million in a stock-swapping deal with South Africa media giant Naspers–coming after an earlier $300 million investment from China’s Internet behemoth Tencent–BoomTown dialed up DST partner Alexander Tamas in London to interview him about the implications.

This developing international spiderweb of digital and media companies begged the question of what DST might do with all this new dough, especially since it has created quite a splash over the last year investing massive gobs of money in high-profile, social-focused U.S. Internet companies.

That has included, most prominently, social networking powerhouse Facebook, as well as Groupon and Zynga.

Actually, said Tamas, the money is for expansion of DST’s core businesses in Russia, Poland and the Baltics–in email, social networking, gaming and entertainment–at units such as Mail.ru, which was co-owned by Naspers and DST.

In essence, said many analysts, it will simplify its ownership structure, and could eventually lead to an IPO for DST.

For a 30 percent stake in DST and the $388 million, Naspers forked over its 39.3 percent stake in Mail.ru into DST.

“The idea was for us to be able to completely control our Russian portfolio,” said Tamas, part of a series of moves which included its recent purchase of AOL (AOL) instant messaging unit ICQ for $187.5 million in cash. “We wanted 100 percent at one company.”

Also a goal: To better link its services with those in China, owned by Tencent, which invested $300 million in DST in April, giving it just over a 10 percent stake.

Naspers, by the way, owns 35 percent of Tencent.

“It’s a pretty good dialog all around,” said Tamas (pictured here), linking companies with both global and local aspirations.

But it’s the global ambitions that have attracted the most attention to DST of late, which, Tamas noted, created some confusion and unfair maligning of the company.

Interestingly, although it is all mashed up on its Web site, DST itself is not technically the entity that maintains its investments in companies such as Facebook.

That would be DST Global, its international arm which directly hold the stakes. It is not part of the Naspers or Tencent deals.

Of course, both are run by the same people, especially DST CEO Yuri Milner, and DST has a stake in DST Global.

“Initially, DST did fund those transactions,” said Tamas. “But we wanted to separate these investments from the Internet company to give investors the clearer differentiation.”

As to its future investments, Tamas said the company will likely fund start-ups that “check the boxes,” including exponential growth and social virality.

That means only two investments annually, as opposed to 10.

He also said DST would continue to fork over large sums–its invested well over $100 million in each of its U.S. deals.

“There is a perception that we pay high prices,” admitted Tamas, who noted its Facebook investment is now valued at much more. “But we have a global outlook on what we are investing in.”

DST is also a believer in getting some of that financing in the hands of founders and early investors, since it relieves financial pressure to sell or go public before a start-up’s time.

“We want to give the companies we invest in a year or two run,” said Tamas. “That is the sweet spot.”

He said, after its U.S. flirtation, that DST is now looking more in Asia and Europe.

But, even with its expansion and getting investments from well-known media giant such as Naspers, Tamas said he is not sure DST can shake the continued questions about the sources of its funding, especially given some of its initial investors are clearly part of the much-maligned Russian business oligarchy.

“We always have to explain and justify all of Russia,” said Tamas defensively. “Obviously, Naspers did its due diligence, as have others, and they feel comfortable with DST.”

Still, Russian issues will remain a concern for the long term. As noted in a recent report by Bank of America (BAC) investment unit Merrill Lynch, for example, on the Naspers-DST deal:

“We are also concerned that DST’s dominance in the Russian internet space (close to 70% market/mind share) may attract the scrutiny of the Russian government. The precedent with the other leading Russian internet company Yandex, when the government got a veto on sale or a golden share, signals that the government may not welcome a full takeover of DST by Naspers or Tencent.”

“We know the issues,” said Tamas. “But the best digital companies going forward are going to have to understand and operate in different parts of the world that are not just in Silicon Valley.”

]]> http://allthingsd.com/20100719/dsts-alexander-tamas-talks-about-new-investors-new-investments-and-dealing-with-troubling-russian-stereotypes/feed/ 0 http://allthingsd.com/20100304/groupons-andrew-mason-speaks/ http://allthingsd.com/20100304/groupons-andrew-mason-speaks/#comments Thu, 04 Mar 2010 17:00:03 +0000 Kara Swisher http://kara.allthingsd.com/?p=25036

The last time I really was truly bullish on a start-up and its founder–BoomTown’s motto is wait-and-see rather than hype-it-up–was AdMob’s Omar Hamoui.

That turned out pretty well, with the sale of the mobile advertising site to Google (GOOG) for $750 million last fall.

My 2010 start-up that passes the slightly-less-raised-eyebrow test is Groupon, a group-based social buying service that nabbed another $30 million in funding in December.

So earlier this week, I sat down with Groupon’s Midwesternly-nice Andrew Mason, 29, to talk about where the start-up is headed with its pile of dough and growing base of consumers who want to make a deal.

The Chicago-based Groupon has actually raised a total of just under $36 million from angels, New Enterprise Associates and Accel Partners so far.

Not that it needs it. The company–like AdMob–is profitable, despite having 200 employees and and a lightning growth path to expand its base of local sites.

The innovative service, which launched only a year ago, features a “daily deal” with a huge discount on a wide range of things–from spas to skydiving and, recently, pole-dancing lessons–in more than two dozen U.S. cities, including Chicago, Boston, New York and San Francisco.

Not everything works–a recent offer of a lobster dinner shipped to buyers was a bomb, as was a tour of Michael Jackson’s childhood home in Gary, Indiana.

The deals are offered to large groups of potential buyers on the Web, through email or via social networking sites like Facebook and Twitter.

Using social tools, Groupon–a mashup term for “group” and “coupon”–tries to use collective buying power to get low prices and push customers to local businesses.

If it reaches the number of buyers it needs, which can be in the thousands, Groupon sells coupons to the consumers and collects a hefty fee for the sale from the businesses it sends customers to.

At the cost of discounting and of paying off Groupon, small businesses get a crack at a lot of new customers–think of it as social networking lead-generation or, perhaps, the “Social Shopping Network.”

Groupon grew out of a project of The Point, an online community launched in 2007 for organizing group action.

This kind of thing has been tried before, of course, centering on consumers who group together to get discounts on items by purchasing them in bulk.

In Web 1.0, there were many group-buying sites, most of which failed badly. One of the more high-profile ones–Mercata–got $90 million in funding from investors, including Paul Allen’s Vulcan Ventures.

But now the group-buying space has been reinvigorated, with a spate of competitors, some of which are clear copycats–which, touchingly, really bugs Mason.

There is even a site, called Yipit, that aggregates all the group-buying sites.

Here’s the video of my interview with Mason at the Accel offices in downtown Palo Alto, Calif., on his second visit to Silicon Valley–as well as a video below it from Groupon about how the service works:

Learn How Groupon Works! from The Point on Vimeo.

]]> http://allthingsd.com/20100304/groupons-andrew-mason-speaks/feed/ 3 http://allthingsd.com/20100304/facebook-ceo-in-no-rush-to-friend-wall-street/ http://allthingsd.com/20100304/facebook-ceo-in-no-rush-to-friend-wall-street/#comments Thu, 04 Mar 2010 13:00:27 +0000 Jessica E. Vascellaro http://voices.allthingsd.com/?p=22032 PALO ALTO, Calif.–Most everyone in Silicon Valley and on Wall Street agrees: The eventual IPO of social-networking site Facebook could make its founder the world’s richest twenty-something.

Yet Chief Executive Mark Zuckerberg, now 25, seems intent on deferring that multibillion dollar payday.

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]]> http://allthingsd.com/20100304/facebook-ceo-in-no-rush-to-friend-wall-street/feed/ 0 http://allthingsd.com/20100205/friendfinder-cancels-the-worlds-first-web-porn-ipo-after-investors-yawn/ http://allthingsd.com/20100205/friendfinder-cancels-the-worlds-first-web-porn-ipo-after-investors-yawn/#comments Fri, 05 Feb 2010 12:03:57 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=16026 Last month, we posed this question in a headline about FriendFinder Networks: “Are Investors Finally Ready for an Internet Porn IPO?” Today we know the answer: No.

FriendFinder, a collection of porn sites and niche social networks, was supposed to start trading this week, after filing for a public offering more than a year ago. But this morning, the company pulled its IPO, citing “market conditions.”

I’m assuming this is not a euphemism for the Dow’s plunge yesterday, but instead a polite way of saying “we couldn’t find buyers.” The AP reports that FriendFinder, which was trying to sell some 20 million shares for $10 to $12, sold 15 million shares at $7 each earlier this week in pre-IPO trading.

Now FriendFinder will have to find some other way to resolve its massive debt issues. The company throws off a lot of cash, but all of that–and more–is getting hoovered up by loan payments. It reported $45 million in income from operations in the first nine months of last year and spent $75.3 million on interest payments in the same period.

Meanwhile, if you’re in the market for a high-end sports car, this may be the time to make the FriendFinder team an offer. The company has yet to sell the Ferrari 360 Modena it bought from its founder for $125,000 in 2006. FriendFinder is carrying the car on its books at $95,000, but I’ll bet it’s willing to negotiate.

]]> http://allthingsd.com/20100205/friendfinder-cancels-the-worlds-first-web-porn-ipo-after-investors-yawn/feed/ 0 http://allthingsd.com/20091204/another-legal-tussle-for-ebay-and-its-not-skype-this-time-as-former-ceo-and-calif-guv-hopeful-whitman-kicks-off-craigslist-trial-monday/ http://allthingsd.com/20091204/another-legal-tussle-for-ebay-and-its-not-skype-this-time-as-former-ceo-and-calif-guv-hopeful-whitman-kicks-off-craigslist-trial-monday/#comments Fri, 04 Dec 2009 09:33:31 +0000 Kara Swisher http://kara.allthingsd.com/?p=21448

Auction giant eBay is headed to court again Monday, and for once, it has nothing to do with the litigious Skype co-founders.

Instead, it’s a battle in Delaware with craigslist, the San Francisco online classified powerhouse that eBay holds a minority ownership position in.

That stake is actually precisely what’s at stake. Currently, the San Jose, Calif.-based eBay (EBAY) has a less than 25 percent one, although it had acquired about 28 percent in a deal in 2004.

The company waged a lawsuit last year against the privately held craigslist for diluting its ownership position by issuing more stock and thereby causing eBay to lose its board seat.

That happened, alleges eBay, through a “coercive plan” by craigslist founder Craig Newmark and CEO Jim Buckmaster.

“We have acted in good faith as a minority shareholder,” said eBay spokesman Alan Marks. “We are simply asking the court to restore our original interest in the company.”

I sent a late email to craiglist’s rep and will post the reply if I get one.

Whitman–who is running for the Republican nomination for California governor–takes the stand on opening day Monday to talk about the original deal with craiglist.

She will be followed by eBay founder Pierre Omidyar.

Of course, craiglist has its own suit in San Francisco, alleging that eBay stole confidential information to create a competing classified service called Kijiji–a dopey name that BoomTown hereby rules someone should be arrested for thinking up–and other misdeeds.

But, so as to be consistent in its awkward legal messes, there is a Skype link: Current Skype President Josh Silverman had been the craigslist board member for eBay and played a key role in developing Kijiji.

Under Whitman’s leadership, ebay also bought Skype, in 2005, and sold a big stake recently.

It was a very controversial sale, which in turn, led to a series of ugly lawsuits from the Skype co-founders, which were just settled last month.

It will be interesting to see what Whitman, who has recently declared that the disastrous Skype acquisition was a good one, says about the craigslist debacle.

Perhaps she’ll say that eBay should have limited its investing during her watch to antiques and other fine collectibles?

]]> http://allthingsd.com/20091204/another-legal-tussle-for-ebay-and-its-not-skype-this-time-as-former-ceo-and-calif-guv-hopeful-whitman-kicks-off-craigslist-trial-monday/feed/ 3 http://allthingsd.com/20090817/sale-of-ilike-to-myspace-135-million-in-cash-6-million-for-talent-retention-delayed-over-tax-issues-reallyplus-the-list-of-other-suitors/ http://allthingsd.com/20090817/sale-of-ilike-to-myspace-135-million-in-cash-6-million-for-talent-retention-delayed-over-tax-issues-reallyplus-the-list-of-other-suitors/#comments Tue, 18 Aug 2009 06:25:06 +0000 Kara Swisher http://kara.allthingsd.com/?p=17756

The board of iLike planned a meeting earlier tonight to go over a buyout offer by MySpace, several sources close to the situation said. But it was suddenly canceled because of some thorny tax implications related to the talent-retention part of the deal to purchase the social music start-up.

This does not mean the pending acquisition is in jeopardy, sources said, and it could be on track to be signed as early as today, barring any more complications.

That is what both iLike and MySpace execs are hoping, said sources, one of whom described the outstanding issues as a “technicality.”

What’s also been unclear is the actual price the social networking giant is paying for iLike, which has been reported as about $20 million.

In fact, only $13.5 million will be paid upfront in cash, with about $8 million of that money likely going to one of its major shareholders, Ticketmaster Entertainment (TKTM), due to its preferred shares.

Another $6 million has been promised by MySpace in forward payments to retain some key employees–including iLike co-founders and twin brothers Ali and Hadi Partovi.

Although those employees can remain in Seattle, where iLike has its HQ, they must stay employed at Beverly Hills, Calif.-based MySpace for two and a half years to get their money.

It’s that talent part of the deal that caused the Partovis to cancel the iLike board meeting, which they explained to key investors was necessary due to some confusion over how the money paid to these employees would be taxed.

A person briefed on the issue said that if it was taxed as compensation, it would have a much higher tax rate than if it were considered long-term capital gains.

The Partovis said in the email that they were working on the problem with their advisers on the sale, Allen & Co., as well as with lawyers and accountants.

Tax snafus in the middle of a sale are not exactly the way the entrepreneurial Partovis envisioned it was going to go for iLike (see my various video interview related to iLike below) when they created the compelling music sharing and recommendation service in 2006.

After only a few years, the innovative start-up claims it has 50 million registered users overall.

A lot of that growth was due to iLike quickly becoming one of the most popular widgets on social networking sites like Facebook, where it has also been the top music application, with 10 million active monthly users.

The Partovis–who once were close with execs at Facebook (see my party video below), particularly founder and CEO Mark Zuckerberg–placed great faith in its growth lifting all Web 2.0 boats.

It did not turn out that way, though, especially from the important financial point of view, and iLike scrambled to diversify.

The iLike service recently began offering a music downloading service, for example, as well as other such features, all of which would be attractive to the music-centric focus at MySpace.

Once an Internet sensation, MySpace has been struggling to restructure itself after losing momentum and buzz in recent years, as well as a huge advertising revenue drop in its most recent quarter.

Its owner, News Corp. (NWS), replaced its founders with new management four months ago, including former Facebook exec Owen Van Natta as CEO.

After making major staff layoffs and rejiggering management, Van Natta and his new team have been working on an overhaul of the MySpace product and seem to be refocusing it to become a global music and entertainment service.

MySpace also has a joint venture with major music labels, MySpace Music, which has been trying to attract consumers and build a viable business. Sources said MySpace Music could also buy into the iLike deal or simply license its technology to improve its features.

Thus, purchasing iLike would fit in well with MySpace’s overall plans.

And iLike has also been in need of a fix itself.

For all its popularity, especially on Facebook, it has moved slowly toward profitabilty, and its $17 million in funding has been dwindling, as has its viability as a standalone company.

Back in more frothy Web 2.0 days, iLike’s generous funding gave it a valuation of more than $50 million, which has also lost steam over time and as the economy has worsened.

In the last quarter of fiscal 2008, for example, Ticketmaster wrote down its $13 million investment by $6 million.

Tensions between its execs and iLike have gotten worse over time, although some thought at one time that Ticketmaster would buy iLike.

No longer, which is why the founders turned to Allen & Co., as MediaMemo reported as far back as November, to find another big investor or buyer.

Wrote Peter Kafka: “Delivering free music on the Web has so far proven to be a high-cost, low-revenue endeavor…”

So, the New York deal-making firm ginned up a small group of suitors, which included Facebook, Activision Blizzard (ATVI) and Microsoft (MSFT), as well as MySpace.

Of the three, Activision was most serious, with interest in integrating iLike’s community and technology tools with its Guitar Hero franchise.

But Activision never actually made a formal bid, said sources.

Both Microsoft and Facebook also considered the purchase, but sources said they would only offer stock in a deal. But iLike wanted cash in the deal.

The Partovis were also was wary about working at either place.

Both Partovis, for example, had worked at Microsoft (Ali after selling it LinkExchange in 1998 for $265 million; Hadi several times, once following Microsoft’s acquisition of Tellme Networks, which he co-founded).

As it has turned out, in its short life, iLike’s last, best alternative is apparently MySpace.

“Look, iLike has been shopped around for a while, and while the team and technology are great, it only has one choice and that’s to be sold,” said one person involved in the various scenarios. “The question for the buyer then is whether it was worth it to pay up or just move on and do it ourselves.”

So until the bean counters settle this IRS nightmare, here is my video interview with Hadi Partovi about a year ago at iLike’s HQ in the Capitol Hill section of Seattle, when times were a little more hopeful:

And here is a very dark and very shaky video I did when iLike threw a fete in Silicon Valley to celebrate its start-up two years ago and to send some appreciation in Facebook’s direction–it is so dated that Facebook COO Sheryl Sandberg, who is in the video, is still at Google (GOOG).

(Full Disclosure: News Corp. also owns Dow Jones, which owns this site.)

]]> http://allthingsd.com/20090817/sale-of-ilike-to-myspace-135-million-in-cash-6-million-for-talent-retention-delayed-over-tax-issues-reallyplus-the-list-of-other-suitors/feed/ 4 http://allthingsd.com/20090413/boomtowns-channels-miss-cleo-a-twitter-transaction-more-facebook-follies-and-will-there-finally-be-a-yahoo-microsoft-deal/ http://allthingsd.com/20090413/boomtowns-channels-miss-cleo-a-twitter-transaction-more-facebook-follies-and-will-there-finally-be-a-yahoo-microsoft-deal/#comments Mon, 13 Apr 2009 11:42:23 +0000 Kara Swisher http://kara.allthingsd.com/?p=12173

This weekend on Twitter, someone paid BoomTown a compliment of a sort: “I read you because you are a solid fact-based reporter with a Miss Cleo intuition :)”

Yipes, because of being fact-based, I had to point out that the well-known-via-infomercials Psychic Friends Network shaman turned out to be a bit of a fraud, although she’s always entertaining, with her jaunty Jamaican accent (she was not, of course, from there).

Nonetheless, it got me thinking about how I would predict what would result from all the deal-making that is suddenly in the air, after six months of ennui from the current economic downturn.

While Silicon Valley has been less impacted than, say, New York, things have certainly been tightening up here, with layoffs at big companies and small ones and less frenetic activity than one had come to expect from Web 2.0.

But last week, the pulse seemed to quicken a little with the various rumors that have swirled around Twitter, the variety of controversies around Facebook and the nascent chit-chatting now taking place between Yahoo (YHOO) and Microsoft (MSFT).

Thus, with a third eye to the future, here’s my take on what could happen. Big caveat, though: Much of what follows is all my speculation and analysis and not based on any psychic feelings.

TWITTER TWADDLE

Last week, I did a rather long reported post on what was going on after rumors broke out that Twitter was in “late-stage” acquisition negotiations with Google (GOOG).

While an imminent deal was not pending two weeks ago, I wrote that Twitter was indeed the apple of Google’s eye at the moment–specifically and now more so than ever, many sources tell me, of its Search Product VP Marissa Mayer–for some kind of search deal that could eventually lead to an acquisition.

But I also noted that Microsoft was also in the picture, vying for Twitter’s affections, and I doubted that Microsoft and Google would be the only ones interested in the hot-as-July-in-Alabama microblogging start-up.

Here’s the plus for Twitter: It’s on a hype rocket ship, its growth is also accelerating and it does not need money, since it just got a big slug of venture funding.

And that’s also a minus and why I also predict that there are only two outcomes: a sale very soon or a major investment by one of its suitors.

While I would love for its founders, including Biz Stone and CEO Evan Williams, to stick to their claims of remaining a “strong, profitable, independent company,” a cash offer of over $500 million or a cash-and-stock offer of slightly more will probably be enough to take them off the table, mostly because the getting might never get this good again.

That offer is most likely to come from Google, if I had to make a bet, which is well known for moving quickly when it sees a tasty treat it desires.

That’s a shame, since once the start-up actually does enter these kinds of “late-stage” talks for real, some deserved shine will come right off Twitter’s cute little MINI convertible of a company.

Instead, Twitter might want to take a page from Facebook and let itself grow its own as it explores revenue options, while perhaps taking a large investment and striking a significant commercial deal with a strategic partner like Google or Microsoft.

Then, with a modicum of independence and the possibility of acquisition if it turned out it needed help, Twitter could forge its own destiny.

And wouldn’t that be nice if Google or Microsoft didn’t just gobble up every innovative thing they cannot seem to think of on their own?

FACEBOOK FOLLIES

I will be reporting more very soon on what’s been going on as the powerful social-networking site deals with its fast-growing pains–up to 200 million users now, which is about as impressive at it gets in the Internet space.

Not so impressive is the variety of high-profile management mishaps that have plagued the company of late–from its Terms of Service debacle to its redesign rough road to the way Facebook recently parted with CFO GIdeon Yu.

To say Facebook treated Yu–a well-regarded figure in the tech sector, who had also raised an awful lot of funding for the start-up–with very little of the kind of grace he deserved and that it should have displayed is an understatement.

In the creation of a significant start-up, tensions inevitably flare and there is typically a lot of management turnover, which is natural, for a variety of reasons on all sides.

Why Facebook had to insecurely tout its stable financial state while backhandedly slapping Yu by saying it was in a search for a CFO with “public company experience”–Yu had enough public company experience to make that deeply insulting–was unclear, when it simply could have said he was moving on in the way most such partings are done.

The conflict between its public statement and an internal memo I obtained on Yu’s departure underscored the problem.

Insecure and way too focused on optics is probably an issue Facebook will have to deal with as it moves toward what the company hopes will be in IPO in 2010 or 2011. Rather than all the noise, its only goal should be shaping up its revenue and profit performance and, hopefully, building a cohesive management.

But does that mean current CEO and founder Mark Zuckerberg will have to eventually step aside before a public offering and make way for a more experienced CEO type, as Google co-founders Sergey Brin and Larry Page did for Eric Schmidt, as some have suggested?

I predict not. Because, for all his careening from crisis to crisis of late, I have no question that Zuckerberg–who has fended off big-money acquisition attempts by big players with a cool-cucumberness that Twitter’s execs should study carefully–has every intention of riding Facebook to the very top–or even bottom.

Clearly modeling himself as a modern-day Steve Jobs (who was fired before triumphantly returning) or Bill Gates (a better comparison), Zuckerberg is a visionary techie who wants to style himself as a crack businessman too.

And with a lot of control over the fate of Facebook, he’s going to see his vision of Facebook and himself out.

THE ODD COUPLE

Can two divorced men share an apartment without driving each other crazy?

Oops, I mean can two once-bickering-over-a-hostile-takeover companies start talking without driving each other crazy?

Last week, the news, first reported here Friday, that Yahoo was involved in preliminary talks with Microsoft about an extensive commercial advertising and search partnership–should have come as no surprise.

After all, Yahoo and Microsoft are laggards in the lucrative search space, especially compared to the dominant Google, and they must somehow find a way to get along to get some traction in the marketplace.

But will they or will it be all Felix Unger and Oscar Madison battling until the end of time? While I loved that television show, and movie too, the Yahoo-Microsoft version is not riveting anymore to some.

“I am so bored with their not-coming-to-a-deal,” said one prominent exec, who was involved in the first go-round between the companies. “They need to make a deal, and if they don’t make a deal now, I will be both bored and in shock.”

That made me laugh out loud when I heard it. But it’s not funny, I know, because this is serious stuff!

Okay, then, seriously, this pair needs to come to some sort of partnership agreement like Miss Cleo needs a new reputation.

And, because I am a hopeful psychic, I predict they finally will, dropping all the emotion and history and realizing that they are wasting time and opportunity.

After all, while the future isn’t written, it can–a lot of the time–be both inevitable and utterly obvious.

Speaking of obviously (bogus), here is a video of Miss Cleo’s famous commercial:

Please see this disclosure related to me and Google.

]]> http://allthingsd.com/20090413/boomtowns-channels-miss-cleo-a-twitter-transaction-more-facebook-follies-and-will-there-finally-be-a-yahoo-microsoft-deal/feed/ 2 http://allthingsd.com/20090205/lenovo-boss-falls-on-sword-as-losses-mount/ http://allthingsd.com/20090205/lenovo-boss-falls-on-sword-as-losses-mount/#comments Thu, 05 Feb 2009 20:44:44 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=12603

[ See post to watch video ]

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