AllThingsD » Jeff Jordan

Why Malls Are Getting Mauled

Jeff Jordan — Fri, 21 Dec 2012 23:04:37 +0000

“Online is clearly taking share from brick and mortar. … [T]his is likely to continue”
—International Council of Shopping Centers, last week

America has too many malls.

I’ve recently blogged that many traditional brick-and-mortar retailers are being threatened with “economic destruction” by their advantaged online competition. In an interview with Bloomberg TV, anchorwoman Nicole Lapin asked about the implications of this dynamic on retail real estate. I said I hadn’t studied it, but I thought the ramifications would be very big and very negative (I believe the phrase “apocalyptic” was used).

I’ve since had the opportunity to spend some time looking at this issue, and I believe we’re seeing clear signs that the e-commerce revolution is seriously impacting commercial real estate. Online retailers are relentlessly gaining share in many retail categories, and offline players are fighting for progressively smaller pieces of the retail pie. A number of physical retailers have already succumbed to online competition, including Circuit City, Borders, CompUSA, Tower Records and Blockbuster, and many others are showing signs of serious economic distress. These mall and shopping center stalwarts are closing stores by the thousands, and there are few large physical chains opening stores to take their place. Yet the quantity of commercial real estate targeting retail continues to grow, albeit slowly. Rapidly declining demand for real estate amid growing supply is a recipe for financial disaster.

There are very few thriving physical retailers these days outside of the daily consumables markets. I did a quick analysis on the high-level health of the National Retail Federation’s list of the Top 100 retailers in 2012, focusing on merchandise retailers that would likely be located in malls (removing grocery, drug, restaurant and online retailers). I looked at three measures of retailer health: total sales growth, comp store sales growth and number of stores.

The analysis doesn’t paint a very pretty picture regarding the health of the leading physical retailers in the United States. Total sales growth is mixed and is negative for 20 percent of the sample. Comp store sales growth — arguably the key measure of retailer health — is also mixed, and a quarter of the sample is negative. And note that many of these sales results include the retailers’ online segments, so the picture for their physical stores is even worse. Lastly, store counts are simply stagnant — about as many top retailers shrank their store count as expanded it, and precious few are expanding aggressively. The largest retailers in the U.S. do not look very healthy. And if they’re struggling, it’s likely that their more marginal physical competitors are struggling even more.

I went back to the Top 100 retailers in 2007 to see how that crop had fared five years later and found that four of these top retailers had already gone away through Chapter 11. Interestingly, the picture of these four doesn’t look that different than the 2012 list.

Source: Stores.org Top 100 Retailers

This declining retailer health is directly impacting malls and shopping centers in the form of very high vacancy rates and sluggish rents — exactly what you’d expect to see where supply exceeds demand. Both factors deteriorated quickly during the economic crisis of 2008-09, but they’ve shown virtually no improvement since in spite of improved economic conditions. The recession was the catalyst, but competition from online retailers can only be the continued driver. The mall business isn’t very healthy, either.

These trends are hitting the market capitalizations of most of the largest owners of retail real estate. Simon, General Growth, DDR and Kimco among them own over 600 MILLION square feet of U.S. retail real estate, according to nreionline. Simon’s stock has performed strongly, but the other three stocks have created virtually no value over the past decade.

Source: Yahoo! Finance

Most real estate professionals understand that profound changes are afoot. Don Wood, CEO of Federal Realty Investment Trust, says, “There is too much retail supply in this country.” The Wall Street Journal reports, “Green Street Advisor, an analysis firm that tracks REITs, has forecast that 10 percent of the roughly 1,000 large malls in the U.S. will fail within the next 10 years and be converted into something with far less retail. That’s a conservative estimate; many mall CEOs predict the attrition rate will be higher.” And Daniel Hurwitz, president and CEO of DDR, observes, “I don’t think we’re overbuilt, I think we’re under-demolished.”

I agree with the above perspectives, although I believe they likely understate the eventual impact on malls. A report from Co-Star observes that there are more than 200 malls with over 250,000 square feet that have vacancy rates of 35 percent or higher, a “clear marker for shopping center distress.” These malls are becoming ghost towns. They are not viable now, and will only get less so as online continues to steal retail sales from brick-and-mortar stores. Continued bankruptcies among historic mall anchors will increase the pressure on these marginal malls, as will store closures from retailers working to optimize their business. Hundreds of malls will soon need to be repurposed or demolished. Strong malls will stay strong for a while as retailers are willing to pay for traffic and customers from failed malls seek offline alternatives, but even they stand in the path of the shift of retail spending from offline to online.

This in turn creates further opportunity for online commerce. If I were thinking of starting a new retail brand right now, I would unquestionably start it online. And many very talented entrepreneurs are doing just this! I personally shop at Bonobos for pants, J.Hilburn for sweaters, Ledbury for shirts and Warby Parker for eyeglasses. All of these brands design and source their own goods. They historically would have started in the mall but they now are starting online, a trend that will undoubtedly continue. There clearly will be fewer new offline retailers to take the space vacated by the disappearing brick-and-mortar chains, further pressuring malls.

And in an ironic turn, many of these online brands are experimenting with offline stores — but typically with some important twists. Bonobos and Warby Parker have built showrooms in their New York offices where consumers can come in and try on samples. But if the consumer wants to purchase items, then the companies fulfill the product from their warehouses — they don’t stock inventory in their “stores.” Bonobos has expanded this concept into a few additional locations, but not mall locations. Instead, they are selecting lower cost, non-mall locations and using emails to their online customers to drive folks to these locations. They do this because a consumer’s purchasing typically expands after a visit to their physical store, and the costs are not high given the lack of inventory and lower rents and staffing costs. If this trend expands, it will provide further challenges to malls.

In researching this post, I came across a fascinating (and slightly morbid) Web site called deadmalls.com, a site that chronicles the tales of hundreds of already or soon-to-be dead malls. Co-founder Brian Florence writes, “I started deadmalls.com with my friend Peter Blackbird in 2000 when we both realized that Pete had mountains of data about dead and dying malls stuck up in his head. Why keep this information to yourself? And, realizing the burgeoning power of the Internet and its ability to draw in more information, the site was created to harness stories of woe and merriment from others. It’s been a great success.”

Unfortunately for mall owners, the content on deadmalls.com is about to expand substantially. There are just too many malls in America, and this will only get worse.

Jeff Jordan is a partner at Andreessen Horowitz and is on the boards of AirBnB, Belly, Fab, Circle, Lookout and Pinterest, as well as OpenTable, Wealthfront and Zoosk. Previously, Jeff was president and CEO of OpenTable, which he took public in 2009. Before OpenTable, Jeff was president of PayPal, and he was previously the SVP and general manager of eBay North America. He blogs at http://jeff.a16z.com/.

The Case for E-Commerce Acceleration (a.k.a., Bye-Bye, BBY?)

Jeff Jordan — Thu, 28 Jun 2012 16:20:52 +0000

Scott Olson | Getty Images News

Joseph Schumpeter said in his theory of “creative destruction” that the “process of industrial mutation … incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.”

I believe we’re approaching a sea change in retail where physical retail is displaced by e-commerce in a multitude of categories. The argument at a high level:

Online retail is relentlessly taking share in many specialty retail categories, resulting in total dollars available to physical retailers stagnating or even declining. This is starting to put intense pressure on their top lines.
Physical retailers are very highly leveraged and often have narrow profit margins. Material declines in their top lines make them unprofitable and quickly bankrupt.
Online retail will benefit greatly from the elimination of their physical competition and their growth should accelerate.

Let’s start with the historical context. What’s been happening in retail in recent decades is a perfect example of creative destruction in action. In a little over a half century, multiple generations of specialty retailing concepts have been created and subsequently destroyed. The widespread building of large suburban shopping malls after World War II led to the development of the specialty retail chain store, at the expense of independent, sub-scale “Main Street” retailers. A few decades later, many of these mall-based specialty retail chains were in turn crushed by the development of “big box” retailers, who had had substantial cost, pricing and selection advantages. And currently, many of these big box retailers have been in turn devastated by the rise of e-commerce and its substantial capital and cost advantages. E-tailers don’t need to build, rent, stock and staff a large chain of individual stores; instead, they enjoy significant efficiencies from centralization. An example of their relative efficiencies can be seen in labor: Revenue per employee for Amazon is $0.9 million per year vs. $0.2 million at Walmart.

Book retail provides a good example of this evolution. Independent bookstores gave way to mall-based chains like B. Dalton and Waldenbooks in the 1960-70s, which in turn gave way to big box chains like Barnes & Noble and Borders in the 1980s, who in turn are giving way to e-commerce players (particularly Amazon). B. Dalton, Waldenbooks and Borders are now out of business, and Barnes & Noble is struggling to morph itself into an e-commerce and e-book company before its physical bookstore business evaporates.

I believe that the demise of physical bookstores is just the canary in the coalmine for all of the big box players, and that the same creative destruction will play out across specialty retail. It’s already happened in music and video retail: Tower Records, Virgin Music and Blockbuster Video are all history. And it’s starting to happen in other categories.

The steady, relentless share gains of e-commerce have been widely documented. According to the U.S. Census Bureau, e-commerce had grown to seven percent of total retail by 2010. But there is wide variation in online share by category:

Source: U.S. Census Bureau, Annual Retail Trade Survey

The large “supermarket” categories of food & beverage and health & personal care have tiny online participation, but the specialty retail categories have large and rapidly growing online shares. And the huge category buckets reported by the U.S. Census probably obscure the magnitude of some of the share impacts. For example, the bulky, heavy appliances in the “electronics and appliance” bucket probably haven’t gone online as fast as electronics, suggesting that online share in electronics is probably much higher.

And things get even more interesting when you look at this in terms of dollars, such as in the electronics and appliance bucket:

Source: U.S. Census Bureau, Annual Retail Trade Survey

Total category sales have stalled over the past half decade, likely impacted by the housing bust. But the steady growth of online sales is causing the portion of the market available to offline retailers to be substantially pressured. Total offline sales among all Electronics and Appliance retailers were lower in 2010 than they were in 2004!

So, imagine you are Best Buy. It’s the leading electronics retailer in the U.S., also selling computers, media and appliances. It’s historically been among the most innovative and successful of the big box retailers, and was named “specialty retailer of the decade” in 2001 by Discount Store News. Between 1998 and 2008, the company ripped off 10 straight years of positive comp store sales growth; compounded, its comp store sales were up a staggering 75 percent over this period.

But as we see above, the portion of the market available to offline retailers in Best Buy’s verticals is shrinking due to withering competition from online players with substantial price and selection advantages, exacerbated by “show-rooming” enabled by mobile devices (see my previous post about Belly). Best Buy’s amazing 10-year run in comp store sales growth screeched to a halt in 2009, and it has had negative results three of the past four years. Many of its offline competitors have already gone out of business, as No. 2 player Circuit City did in 2009.

You get a sense of the hurricane that Best Buy is trying to navigate through when you look at its performance by category:

Source: Best Buy

It’s flat-out brutal when your No. 1 and No. 3 categories have dropped 11 and 37 percent respectively in just two years.

Once upon a time, I was CFO of The Disney Stores Worldwide. One thing I learned there is that physical retail is very highly leveraged as a massive chunk of the expense structure is fixed. Each store typically has a long-term lease with fixed rent payments and requires minimum staffing and inventory to operate. And stores require warehouses and trucking fleets to house and transport inventory, and central staffs to manage it all. Due to these high fixed costs, even small changes in comp store sales can enormously impact profitability. I experienced this in vivid detail at The Disney Store. We enjoyed record profits behind surging merchandise sales for the run-away hit “The Lion King” in 1994, but the following year’s results were hammered by anemic product sales for the much-less-successful “Pocahontas.”

Relatively small declines in comp store sales, if sustained, can quickly prove fatal to physical retailers due to this leverage. The Circuit City example is instructive here. Its bankruptcy was preceded by just six quarters of declining comp store sales. The company essentially broke even in its fiscal year ending in February 2007; it declared bankruptcy in November 2008 and started liquidating in January 2009. It is also notable that Circuit City’s bankruptcy has had only modest benefit for Best Buy, as did Borders’ bankruptcy for Barnes & Noble. Not even the elimination of the largest competitor provides material reprieve from brutal market headwinds.

Here is the case for e-commerce acceleration. Continued share gains by e-commerce players shrink the pie available to physical retailers. Marginal physical players go bust, providing only a temporary boost to the remaining offline players and a sustaining boost to online players. But the underlying market dynamics stay the same, and pressure again builds on the remaining physical players. When their top-lines drift below their highly leveraged water lines, they too drown and liquidate. At that point, e-commerce becomes about the only place where consumers seeking a broad selection of merchandise can go. It’s essentially unopposed.

This Darwinian struggle for survival has already played out in music and is in the last act in books and movies. In electronics, Best Buy is the last man standing, and the pressure is building. It has virtually no margin for error, as its operating margin is down to two percent. When it succumbs, (and I believe this is a “when” and not an “if” unless it’s able to pull off a radical transformation of its model), e-commerce will become the only place to find a comprehensive selection of electronic products. And other specialty retail categories like apparel and home are not that far behind their media and electronics colleagues.

We’re extremely bullish on the prospects for e-commerce, and we’re very bearish on the prospects for offline retailers who compete head to head with them. The implications are broad. To paraphrase Schumpeter: We believe that offline retailers that cannot deliver a differentiated value proposition to consumers will be destroyed by a new generation of online retailers that is being created before our eyes.

Jeff Jordan would like to thank his colleague Wei Lien Dang, who provided strong analytic support for this post. Jeff is a general partner at Andreessen Horowitz and is on the boards of AirBnB, Belly, Fab.com, Circle, Lookout and Pinterest, as well as OpenTable, Wealthfront and Zoosk. Previously, Jeff was president and CEO of OpenTable, which he took public in 2009. Before OpenTable, Jeff was president of PayPal, and he was previously the SVP and general manager of eBay North America. He blogs at http://jeff.a16z.com/.

Sarah Lacy Debuts New Tech Site, PandoDaily -- $2M+ in Funding and Guess Who's Working for Her? (Video)

Kara Swisher — Mon, 16 Jan 2012 17:00:28 +0000

As has been widely reported, well-known TechCrunch columnist and Silicon Valley journalist Sarah Lacy has a new gig: Running her own new tech news site, which debuts today.

(She’s pictured here with another recent adorable start-up of hers, named Eli.)

Not so widely reported? The site, called PandoDaily.com, will feature three of TechCrunch’s most high-profile former bloggers: Michael Arrington, M.G. Siegler and Paul Carr.

That’s right, Lacy is Arrington’s boss this time around — even though his CrunchFund venture firm will also be an investor, in a funding round of more than $2 million for PandoDaily.

Other investors — whom Lacy described as “people I like and respect” — include a panoply of tech movers and shakers, including personal investments from Marc Andreessen, Peter Thiel, Matt Cohler, Jeff Jordan, Josh Kopelman, Zach Nelson, Andrew Anker, Saul Klein, Tony Hsieh and Chris Dixon, as well as seed investments from Greylock Partners, SV Angel, Lerer Ventures, Accel Partners and Menlo Ventures.

There will certainly be questions about all these funders who are also topics of PandoDaily’s posts, which Lacy acknowledged. She said the large number of funders was calculated so that none had undue influence.

Of course, many in Silicon Valley will be watching her carefully for any conflicts of interest or punches pulled. Lacy insisted that there will not be a problem and joked that she will definitely not become a VC, referring to the controversy around Arrington becoming one while at TechCrunch.

That issue blew up like a Roman candle, of course, leaving everyone with powder burns — I called the incident a “giant, greedy, Silicon Valley pig pile.”

Interestingly, Lacy did manage to stay out of the spotlight (she was, in fact, having her baby during the worst of the controversy, which was likely more painful).

Ignoring the delicious epic revenge part of this on AOL — which bought TechCrunch and then promptly presided over a tech version of the War of the Roses (and is, ironically, an investor via CrunchFund) — PandoDaily will focus on start-ups in Silicon Valley and everywhere else that homegrown spirit of innovations reaches.

Here’s a screenshot of the cleanly designed and handsome site:

In an inaugural post, titled ““Why I Started PandoDaily,” Lacy compared the site to a colony of trees in Utah, saying, “We have one goal here at PandoDaily: To be the site-of-record for that startup root-system and everything that springs up from it, cycle-after-cycle.”

Which is kind of like TechCrunch, which she left earlier this year.

“This is not TechCrunch 2.0,” Lacy said to me in an interview last week. “But, of course, we will be compared to TechCrunch.”

Of course, especially because of the presence of its star lineup on PandoDaily — who will write regularly, along with an initially small staff of other writers — and also its plans for conferences and other gatherings.

(An AOL source, by the way, said there were no contractual noncompete issues for PandoDaily to worry about.)

Here’s a longish interview I did about PandoDaily with Lacy, who has written two books focused on entrepreneurs, worked at Businessweek and was founding co-host of Yahoo Finance’s daily show “TechTicker.”

She talks about the site’s unusual name, her wrangling over leaving TechCrunch, and the prospect of now running her own show.

Welcome back, Sarah (and call me if you need help with those dudes, as we have wrangled before).

Here’s the video:

[ See post to watch video ]

If Drafted, Andreessen Horowitz Will Not Run Yahoo (But We'll Buy It on the Cheap!)

Kara Swisher — Fri, 09 Dec 2011 18:55:23 +0000

Today, despite being deep in trying to strike a deal with private equity firm Silver Lake that will essentially give it a big say over the doings at Yahoo, Silicon Valley venture firm Andreessen Horowitz wanted to get a few things clear on titles.

In a positively Shermanesque blog post titled “A Clarification With Respect to Yahoo,” Marc Andreessen wrote that neither he nor partner Jeff Jordan would become an operating exec, including CEO, acting CEO, chairman or executive chairman at the troubled Internet giant.

Of course, if the VC firm wins the partial investment deal against other bidders, Andreessen will absolutely be a key player in the remaking of the company. Already, he and Jordan have met with numerous Yahoo execs as they have assessed the company.

The bid by Silver Lake and Andreessen Horowitz is about $16.50 a share for slightly less than 20 percent of the company. The group, which is competing with another bid by TPG Capital, has a lot of other plans around reviving Yahoo and dealing with its myriad of issues.

The reason for the pronouncement, sources said (and I am just boldly declaring myself) is because the firm is now in the middle of raising a mega-funding round of up to $1.5 billion and limited partners are worried about a lack of focus on its many other investments.

So Marc and Jeff are fully committed to moolah-making at the VC firm. Please pay no attention to the whole Yahoo mishegas over in that corner there!

Here’s the entire post (full disclosure — I got the Jordan part right, but surmised that Andreessen could become chairman if his group won the bid):

A Clarification With Respect to Yahoo

From Marc Andreessen, co-founder and general partner of Andreessen Horowitz:

Over the last several weeks, there have been erroneous reports in the press that my partner Jeff Jordan and/or I might become an operating executive of Yahoo in some capacity.

To be crystal clear, neither Jeff, nor I, nor any of our partners at Andreessen Horowitz, are in the running for, or would accept, any operating role at Yahoo, including CEO, acting CEO, chairman, or executive chairman.

Jeff and I have high regard for Yahoo, but we are fully committed to our day jobs as general partners at Andreessen Horowitz and board members of our portfolio companies.

Wealthfront Finally Launches, Aimed at Silicon Valley's "Richie Rich" Newbies

Kara Swisher — Thu, 01 Dec 2011 15:30:11 +0000

Wealthfront, the Silicon Valley start-up with more than $10 million in its own kitty, finally officially launched its long-planned Online Financial Advisor product today, with a focus on attracting techies interested in more easily managing their money.

The Palo Alto, Calif.-based company, which started off as a social investing site called kaChing, shifted over to the new plan just over a year ago. Its aim now is to try to solve the thorny problem of delivering actionable and easy-to-use tools for making investments online, for those who have some money but little time or expertise.

A lot of companies offer similar tools, of course, including big ones such as Fidelity and Schwab, as well as bigger money-management firms. But Wealthfront’s CEO Andy Rachleff and founder Dan Carroll are promising lower fees and more accurate determination of risk via all kinds of online bells and whistles (see below).

Wealthfront is not charging advisory fees on a customer’s first $25,000 under management, with a fee of 0.25% on assets exceeding that.

Wealthfront is backed by DAG Ventures and well-known investors, including Marc Andreessen and Jeff Jordan.

Here’s a video Wealthfront posted about the service, as well as its official press release:

Wealthfront Unveils Automated Online Financial Advisor Service for Silicon Valley and High-Tech Hubs

Highly Sophisticated Investing Advice Finally Made Available through Simple and Low Cost Web Service

PALO ALTO, Calif., December 1, 2011 – The ability for the savvy tech community to easily access high quality, affordable financial advice is now available with the launch of the Wealthfront Online Financial Advisor. Before Wealthfront, sophisticated investment advice was available only to the wealthy, by expensive financial advisors who often can’t relate to today’s tech-savvy generation who want sound financial advice, made easy and convenient. Wealthfront’s Online Financial Advisor appeals to investors from booming tech communities who favor doing everything online, and are looking for ways to have their new wealth managed for far lower fees.

At the core of Wealthfront’s web service is the industry-standard Modern Portfolio Theory (MPT). Until now, the widely adopted investing model has been kept out of consumers’ reach, and was only accessible via expensive financial advisors. Wealthfront automates the application of this intricate investment model, putting the power of MPT directly into the hands of investors online. Moreover, Wealthfront’s pricing structure trumps all traditional financial advisor models. The online service makes it possible to receive a sophisticated, meticulously managed investment plan at a price that is 75% lower than traditional financial advisors. There are no advisory fees on a customer’s first $25,000 under management, and only a fee of 0.25% on assets exceeding $25,000.

“This is exactly what most people in the technology industry need. It’s the kind of advice you’d get if you had Goldman Sachs manage your money and it does away with the hidden fees we in tech despise,” said Piaw Na, a long time, former employee of Google and popular blogger on the topic of investing. “What’s more, the recommendation on the investment mix is provided with a full explanation of what was picked and why, making the whole experience a massive and much needed shift that is especially appealing now.”

Wealthfront’s high quality investing advice is powered by its Precision-Investing Platform™, the breakthrough software behind the service. The Platform uniquely assesses a customer’s true risk tolerance, recommends an optimized portfolio of carefully selected Exchange Traded Funds (ETFs) spanning six asset classes, and monitors and periodically rebalances the investment mix to maintain a customer’s desired risk tolerance.

Wealthfront is backed by Silicon Valley luminaries including DAG Ventures and individual investors including Marc Andreessen, Jeff Jordan, former OpenTable CEO and President of PayPal now at venture firm Andreessen Horowitz, and partners from Benchmark Capital, Index Ventures and Kleiner Perkins Caufield & Byers.

“The financial advisor world has long recognized that one day the Internet and software would pose a credible threat to their hold on the sub $5 million category of individual investors,” said Paul Pfleiderer, C.O.G. Miller Distinguished Professor of Finance at Stanford Graduate School of Business, and Wealthfront advisor. “Wealthfront has made accessible what historically had been out of reach or prohibitively costly for a large class of investors. By using a simple, yet powerful engine for accurately assessing risk and return in the MPT context, Wealthfront has established a new standard for quality financial advisement on the web.”

“With the biggest names in venture capital and the brightest minds in software development, we’re ushering in a financial advisor service that’s capable of precisely managing a customer’s investments from $5,000 to tens of millions with a pricing approach unheard of in the financial services industry,” said Andy Rachleff, CEO of Wealthfront. “Wealthfront emerges at a time when many tech companies are enjoying record earnings, initial public offerings, and strong acquisitions. This creates masses of people in tech looking to invest for the first time and who want to manage their finances in the same manner they’ve organized every other aspect of their lives, online.”

“The promise of the Internet is to disrupt incumbent providers, enabling new companies to provide high quality services at substantial savings through the innovative use of software,” said Jeff Jordan, Wealthfront board member, former CEO OpenTable and President of PayPal and now General Partner at Andreessen Horowitz. “Wealthfront embodies this promise, democratizing access to high quality financial advice. I believe this will appeal strongly to a generation that has grown up with the Net and use it to manage all facets of their life.”

For more information on Wealthfront Online Financial Advisor, or to create a free account, visit www.wealthfront.com.

Marc Andreessen vs. Reid Hoffman in Yahoo Savior Face-Off? Not Yet. (But Delicious to Imagine.)

Kara Swisher — Thu, 01 Dec 2011 10:23:15 +0000

Last night, the New York Times dropped a juicy little tidbit into its everything-but-the-kitchen-sink daily update of the board mishegas at Yahoo around the deliberations yesterday over two competing private equity bids to buy a partial stake in the company.

No, not the one about Jeff Jordan — former eBay exec, OpenTable CEO and now VC at Andreessen Horowitz — possibly taking a big role at Yahoo if the firm’s bid with Silver Lake prevailed — which was mysteriously removed very soon after it posted (’cuz he will not, so good move, NYT!)

I mean the one about the venture firm’s big-kahuna partner, Marc Andreessen — who will indeed take a board seat and play a strong role in Yahoo’s future if his bid wins — getting a possible competitor in the Silicon Valley savior section of the ongoing show.

That would be in the form of Reid Hoffman, the well-known entrepreneur, VC and angel investor, who the Times said had talked with TPG Capital, Silver Lake’s rival in the Yahoo bidding, about becoming a possible partner.

Wrote the Times:

“TPG has held discussions with Greylock Partners, another venture capital firm, about a possible alignment, two people said. TPG is hoping to draw on the expertise of Reid Hoffman, one of Greylock’s partners and the founder of the professional social network LinkedIn, these people said.”

Translation: If Silver Lake has a tech icon of substance on its team to give uber-geek appeal to its offer — dagnabbit — then TPG was going to raise with another one, whom the very same Times reporter who wrote last night’s article recently nicknamed “The Start-Up Whisperer” in a recent glowing profile of Hoffman.

While I am still trying to grok what a start-up whisperer exactly means (and how someone as self-effacing as Hoffman would react to such a twee moniker without snickering), it’s a move that has likely already irritated Silver Lake.

After all, TPG aiming at nabbing Hoffman is akin to two crazy neighbors trying to one-up each other in holiday-lighting lawn decor. (You have a singing Santa, so I’ll have a singing Santa — and I might even add a Lady Gaga-themed crèche for good measure!)

But it’s not a bad instinct, either, to get your own live-action Silicon Valley legend, even if it is only half true in Hoffman’s case.

Because, according to sources who know such things, while Hoffman and TPG have had conversations, there have been no commitments, and nothing is close to being agreed on to link the pair.

That could certainly change, and quickly, but Hoffman or Greylock aren’t currently in TPG’s proposal to Yahoo.

That’s in contrast to Andreessen, who is all in (I am not even going to bother with “sources said” here, since everyone and my mother has seen the proposal) with Silver Lake on the deal to purchase 19.9 percent of Yahoo for about $16.50 a share.

As I reported earlier this week, for Silver Lake’s money and expertise in fixing broken things, the bid includes: Silver Lake getting three board seats; cash going to a buyback of stock or granting of a dividend to shareholders; the ability to select a CEO; approval of its strategic plan for Yahoo, and its solution to come to terms with Yahoo’s unhappy Asian partners; and all the purple wearables you could ever hope for (perhaps Yahoo’s best asset, IMHO, especially worn by such obviously cool dudes, as seen here).

Also, controversial Yahoo co-founder Jerry Yang gets to stay around on the board (but only if he becomes very, very quiet, so as not to rile the activist shareholders).

TPG’s bid is less formed, although its price is slightly higher. And the PE firm has yet to check the “Big Geek Included” box.

Hence, the floating of Hoffman as a contender to take on Andreessen, who was once dubbed the “Golden Geek” by Time magazine.

I hope TPG does, soon, since what a matchup it would be!

But, for now at least, the pair — who share big investments in a range of Web companies, most especially Facebook (Andreessen is on the board of the social networking giant, and Hoffman was an early investor and adviser) — are at peace.

Dagnabbit.

Viral Video: An Interview With Andreessen Horowitz's Jeff Jordan

Kara Swisher — Thu, 03 Nov 2011 12:35:30 +0000

Last weekend, I interviewed former OpenTable and eBay exec Jeff Jordan — who is now a newly minted VC with Andreessen Horowitz — at the student-run Play digital media conference at the Haas School of Business, University of California, Berkeley.

It turned out to be a lively session with the sassy Jordan, who talked about a wide range of topics, from entrepreneurship to running a scaled org to his first venture investments, such as Pinterest.

Luckily, I get to interview Jordan again tomorrow, at Open Mobile Summit in San Francisco, along with eBay’s CEO John Donahoe. The topic will be mobile commerce.

Here’s the video of the event, with thanks to ReelSurfer for the embed:

Exclusive: Pinterest Closes New $27M Round With Andreessen Horowitz Valuing Start-Up at $200M

Kara Swisher — Fri, 07 Oct 2011 18:45:27 +0000

Pinterest, the infectious virtual bulletin board site, is poised to close a large round of funding — reportedly more than $25 million — with Andreessen Horowitz, which values the company at $200 million.

That’ll buy a lot of digital pushpins.

(UPDATE: Pinterest and Andreessen Horowitz confirmed the new funding, which is $27 million. The firm’s Jeff Jordan will join Pinterest’s board.)

In an interview, Jordan said that the amount of interest in Pinterest — get it? — was a big reason for the deal.

“People love the product, even though it is only in beta so far, with consumers who use it voraciously,” he said. “It’s elegantly social.”

Co-founder Ben Silbermann said the focus at Pinterest — which has only eight employees — was to “provide users with a place to discover and share in an inspirational way … we want to help people get in touch with their interests in real life.”

The start-up, which has no revenue to speak of yet and is still in invite-only mode, has become the hottest start-up of late in Silicon Valley, given its quick growth and compelling idea that has been called “experiential shopping.”

To me, it is just a really cool way of finding stuff of all kinds — from kids’ toys to inspiring quotes to travel tips — using a very savvy crowd of users via social visual bookmarking.

It’s kind of like Oprah on steroids, with users creating and sharing virtual collages on the handsome and easy-to-use site. Others can than “re-pin” them and great stuff rises in rank.

The site has previously raised $10 million from Bessemer Venture Partners, valuing the company at $40 million.

Mobile Security Specialist Lookout Secures Another $40 Million in Funding

Ina Fried — Wed, 21 Sep 2011 16:00:10 +0000

Proving once again that it is adept at more than just securing mobile devices, Lookout Mobile Security said Wednesday that it has landed a further $40 million in a financing round led by Andreessen Horowitz.

As part of the investment, Andreessen’s Jeff Jordan will join Lookout’s board of directors. In addition to Andreessen Horowitz, current Lookout investors Khosla Ventures, Accel Partners and Index Ventures also increased their investments.

To put his firm’s millions into Lookout, Jordan also had to invest in a new wardrobe. He was meeting with Lookout CEO John Hering at a Fortune conference in Aspen earlier this year, and decided he wanted to get the term sheet done then and there. Jordan extended his trip by a day, but didn’t have enough clothes and had to fly back in an outfit he picked up at a nearby sporting goods store.

Still, Jordan reckons Lookout is worth the investment in both dollars and clothing.

“Tons of people are trying to turn your phone into your wallet,” Jordan told AllThingsD. “There is going to be a screaming need for security on mobile devices.”

Jordan, who spent time running eBay’s payments and PayPal businesses, said he saw firsthand the lengths that crooks will go to when there is money to be had. As cash moves to mobile devices, security threats will, too, he said. Already this year, Lookout is seeing monthly instances of malware equal to what it saw for all of calendar 2010.

The new funding will help Lookout as it looks to expand internationally and onto other mobile devices, as well as to beef up the back-end infrastructure that powers Lookout’s service.

“There’s some very exciting things we can do with tablets,” Hering said in an interview.

As part of the announcement, Lookout notes that its software is now installed on 12 million smartphones, up about a million devices from last month. Hering said the company is now approaching 100 employees. Just 18 months ago, Hering said, the company had 10 employees and about 100,000 people using its service.

One of the biggest risks the company faces is growing itself quickly enough; the additional money and Jordan’s experience should both help on that front, Hering said.

“It just was a no-brainer for us,” he said.

The company is also outgrowing its space and plans to move to larger digs in December, just a few blocks from its current San Francisco offices.

“We’ve been growing incredibly quickly,” Hering said.

Lookout raised money twice last year, including a $19.5 million Series B round that was announced in December, and $11 million in funding back in May.

Airbnb Isn't Resting When It Comes to Rolling Out New Security Features

Tricia Duryee — Fri, 05 Aug 2011 23:19:39 +0000

After apologizing to its community earlier this week and pledging to do better, Airbnb has continued rolling out a steady stream of new security features that are designed to make it safer for people to rent out their homes to complete strangers.

The latest update includes three recommendations that were pulled from Airbnb’s suggestion box, where members are able to float ideas to the company that could make the platform safer or easier to use.

According to the company’s blog post, the top three features people asked for were: Making profile pictures for potential guests mandatory; being able to decline a guest without it dinging your ranking; and allowing hosts to rate users after a stay (which already existed, but apparently was not easy to use).

Airbnb, which has listings in 16,500 cities worldwide, came under intense scrutiny over the past few weeks after one of its hosts had her place completely trashed and burglarized.

The situation snowballed out of control when consumers questioned whether Airbnb handled the situation correctly.

On Monday, Airbnb apologized and announced a $50,000 guarantee that will protect the property of hosts who book through its Web site, a new 24-hour customer hotline and an in-house task force dedicated to reviewing listings for suspicious activity. Members are also invited to contact the CEO directly at brian.chesky@airbnb.com.

On Wednesday, it introduced the ability to connect your profile to LinkedIn and Twitter, which can help build your reputation or validate your identity. It also launched a feature called Photobooth, which will allow members to take profile pictures using their webcams directly inside Airbnb.

But before any of this, I had the chance to ask Jeff Jordan, one of Airbnb’s new investors, about whether he was concerned over issues of safety and trust. Jordan is the newest general partner at Andreessen Horowitz, which contributed half of the company’s $112 million round of funding.

Jordan, who is a former executive at eBay and PayPal, knows a lot about building online marketplaces in which two people interact and pay each other for goods and services. Those companies, too, had a steep learning curve for getting it right, he said.

In the same way that those companies have largely earned trust with consumers, he’s confident that Airbnb can do the same.

“I do know that Airbnb is highly focused on providing a safe environment. It’s not foolproof, but there have been very few cases like this,” he said. “In the Airbnb case, they collect personal information on the host and the guest, which includes payment information — which is pretty individually specific information.”

Other recommendations submitted to the suggestion box include Skype introductions, mandatory deposits, and a requirement that international guests supply a copy of their passport.

OpenTable Fills CFO Role Just as Stock Drops on Revenue Miss

Tricia Duryee — Wed, 03 Aug 2011 05:17:46 +0000

OpenTable has hired a new CFO — perhaps just in time to stop the stock’s free fall — to correct its course after narrowly missing revenue expectations in the second quarter.

The online restaurant reservations company said today it has appointed Duncan Robertson to the position of CFO. Robertson previously co-founded and served as CFO of SnapStick, a mobile app company. Prior to that, he was CFO of Aricent, a technology services company.

Three months ago, the company surprised Wall Street when its CFO Matthew Roberts was promoted to president and CEO and said Jeff Jordan, the president and CEO, would transition to executive chairman.

Jordan has since taken a job at Andreessen Horowitz, the large Silicon Valley VC firm.

When Jordan’s departure was announced, OpenTable’s stock fell $17 to $96. Today, the company’s stock continued spiraling downward, slipping another 9.5 percent, or $6.51 a share, to stop at $68.90 a share in after-hours trading.

OpenTable reported second-quarter revenues of $34.3 million, a 53 percent increase over the same period a year earlier. It was that figure that narrowly missed analyst expectations of $35.3 million, according to Thomson Reuters.

The company’s quarterly profits totaled $6.3 million, or 26 cents a share, up from $2.6 million or 11 cents a share in the second quarter 2010.

Despite executives playing musical chairs, Citi’s Internet Research Managing Director Mark Mahaney wrote in a note to investors that the company reported an “intrinsically robust” second quarter, and that revenues were only modestly below his estimates, whereas adjusted earnings per share of 33 cents beat expectations.

Other positive results:

Its base of restaurants increased 27 percent to 15,560 year over year and diners seated totaled 22.2 million, a 47 percent increase in North America.
Internationally, it saw even stronger growth, with its installed base of restaurants growing by 276 percent and seated diners up 249 percent year over year.

Investors Not Overly Concerned by Airbnb Rental Nightmare

Tricia Duryee — Wed, 27 Jul 2011 23:34:10 +0000

Over the past three years, Airbnb has connected more than two million travelers looking for a place to stay in spare bedrooms and unused homes around the world.

Based on that demand, investors wrote checks last week to fuel even more growth. The round, announced earlier this week, totaled a jaw-dropping $112 million, which reportedly valued the company at more than $1 billion.

Already, Airbnb is back in the spotlight over a rental gone really, really wrong.

On June 29, a woman in San Francisco named EJ blogged about how the apartment she rented to someone using Airbnb was completely ransacked and vandalized. Her personal documents were stolen, and ultimately, her identity was, too, during a well-executed raid that lasted for roughly a week while she was on a trip.

They smashed a hole through a locked closet door, and found the passport, cash, credit card and grandmother’s jewelry I had hidden inside. They took my camera, my iPod, an old laptop, and my external backup drive filled with photos, journals… my entire life. They found my birth certificate and social security card, which I believe they photocopied – using the printer/copier I kindly left out for my guests’ use. They rifled through all my drawers, wore my shoes and clothes, and left my clothing crumpled up in a pile of wet, mildewing towels on the closet floor. They found my coupons for Bed Bath & Beyond and used the discount, along with my Mastercard, to shop online.

Her story was disseminated more broadly when her post showed up this morning on Hacker News.

With a massive round like the one Airbnb has raised, there will be considerable pressure to hit aggressive growth targets. But no matter how intense the pressure gets, this is a pretty big reminder that the company must put its customers’ lives and security first before getting one more reservation.

Jeff Jordan, the newest general partner at Andreessen Horowitz, which contributed half of the company’s round, is not overly concerned about the situation.

In an interview today, Jordan told me he was aware of the incident and found it comparable to his days at eBay, where the company was building a marketplace in which two strangers met and exchanged cash for a used item.

“I do know that Airbnb is highly focused on providing a safe environment. It’s not foolproof, but there have been very few cases like this. At eBay, it was about two people who didn’t know each other doing commerce together,” he said. “Both are working really hard to make a safe marketplace. In the Airbnb case, they collect personal information on the host and the guest, which includes payment information — which is a pretty individually specific information.”

Airbnb issued a statement today saying that a suspect in the situation is now in the custody of the San Francisco Police Department.

“We’ve created a marketplace built on trust, transparency and authenticity within our community, and we hold the safety of our community members as our highest priority. The vast majority of our community members genuinely respect and protect each other, but we urge users to be careful and discerning with each other and to hold others accountable through reviews, flagging and our customer service channel. Our hearts go out to our host and we will continue to work with her and with the authorities to make this right,” the statement said.

In this particular case, the host does not blame Airbnb, but questions whether its approach is better than Craigslist, where there’s no sense of security so therefore people are more on guard. She even hints that maybe her situation came about from Airbnb’s fast growth.

She writes: “I can still recognize airbnb.com to be a brilliant concept that fills a much-needed hole in the traveler market, and based on their amazingly kind, caring response and support throughout the past few days, they have proven to me that they are an honest company with pure, good intentions. But I do think theirs was a concept that was executed much too quickly, and that some basic screening and security measures must be instituted as soon as possible, that some basic efforts be made to help prevent this from happening to another unsuspecting host.”

Airbnb answers additional questions about its security policies here.

Airbnb Raises $112 Million for Vacation Rental Business

Tricia Duryee — Mon, 25 Jul 2011 05:36:04 +0000

Airbnb, the site that lets you rent everything from spare rooms in apartments and homes to cabins, tree houses, boats, parking spaces and even the country of Liechtenstein, has raised a significant sum of money to rival major online travel sites.

The San Francisco-based company has received $112 million in a second round of funding from well-known Silicon Valley investor Andreessen Horowitz. Other investors participating include DST Global and General Catalyst.

Andreessen Horowitz contributed about half of the round. Jeff Jordan, one of the newest general partners at the firm (and who recently left OpenTable), wrote about the investment in a blog post.

TechCrunch previously reported that the company was seeking more than $100 million at a $1 billion-plus valuation.

The second round of funding for the company is astonishing, given that its first round totaled $7.8 million.

The company said the capital will be used to generate new growth and hire additional employees.

The vacation rental start-up was recently featured in a WSJ story as having some of the most enticing job perks, such as wine and cheese mixers, rooftop barbecues and an air-guitar contest.

Airbnb has experienced extremely strong growth over the past year, and now has booked more than two million nights. It also receives more than 30 million page views per month.

The company expects to grow internationally, including in markets such as Germany, the U.K., France and Brazil, where it is already seeing some traffic.

Earlier this month, HomeAway, which owns several vacation home rental property sites around the world, raised $231 million in stock from its IPO.

LAL Raises $5M Led by New Andreessen Horowitz Partner Jeff Jordan

Liz Gannes — Thu, 30 Jun 2011 19:00:23 +0000

LAL (a.k.a. LikeALittle), the service that originated with flirting on college campuses and is now trying to enable connections with any nearby people, has raised a $5 million Series A round led by its seed investor Andreessen Horowitz.

One interesting aspect of the funding is that it was led by Jeff Jordan, the former OpenTable CEO who has now officially joined Andreessen Horowitz as its fifth general partner (as AllThingsD had first reported).

In explaining the LAL investment, his first for AH, Jordan said, “The central theme is connecting with people around you and enabling seamless communication with them.” He also said he liked LAL CEO Evan Reas’ product sense and his team’s speed of innovation.

The Series A round includes angel investors such as TechCrunch founder Michael Arrington.

Andreessen Horowitz’s Marc Andreessen, meanwhile, jumped in to answer my questions about how LAL compares to the competition and AH’s other investments.

Regarding Foursquare, for which AH just led a $50 million round, Andreessen said, “Foursquare is much tighter tied in with the social graph and people you already know. LikeALittle is people you don’t know. LikeALittle is a lot closer to craigslist, and Foursquare is closer to a definitive relationship with your environment.”

What about Color, which has also promised to connect users with interesting people around them?

“That depends what Color is,” Andreessen replied (which seems like a fair way to evade the question!).

Jordan said that in keeping with his experience at OpenTable, eBay and PayPal his venture investments will focus on e-commerce, mobile and consumer tech companies. He noted that prior to joining Andreessen Horowitz he had already been an active angel investor and start-up adviser to about 14 companies.

Further reading: My extended take on how LikeALittle-style proximity-based relationships are a promising alternative to Facebook friending, and coverage of LAL’s seed funding including a video interview with Reas.

TellApart Raises $13 Million to Help Online Retailers Nab Waffling Customers

Tricia Duryee — Mon, 13 Jun 2011 14:00:13 +0000

Burlingame, Calif.-based TellApart has raised $13 million in a second round of funding to support something it calls “transactional retargeting.”

In practice that looks a little like this: Someone browses online for a particular product — perhaps a bike trailer. Later, when they are on a separate site, they see the same trailer being advertised in an ad. [See photo below.]

The second round of funding was led by Bain Capital Ventures. To date, TellApart has raised $17.75 million.

The company was founded in 2009 by former Google product and engineering executives Josh McFarland and Mark Ayzenshtat.

Other investors include Greylock Partners and several well-known angels, including Ron Conway, Twitter CEO Dick Costolo, LinkedIn’s founder Reid Hoffman and OpenTable’s former CEO Jeff Jordan.

The new financing will go toward supporting additional customers.

The company says it has the ability to “tell apart” the best customers from the rest. By identifying the most likely customers to target, it says it can generate an average 7.5 percent user click-through rate and an average 4.5 percent conversion rate from the ads it places on other sites.

By retargeting, TellApart claims its clients end up seeing an average of three to five percent lift in revenue.

TellApart only charges for its platform when a prospective customer clicks on a TellApart ad and makes a purchase.

Customers include Diapers.com, eBags, Drugstore.com and Hayneedle.

OpenTable's Stock Falls $15 More in Wake of CEO Switch

Tricia Duryee — Wed, 04 May 2011 21:02:06 +0000

OpenTable’s stock continued a free fall today, dropping $15.65, or roughly 14.9 percent, to trade at $89.35 a share.

Yesterday, Jeff Jordan, the company’s president and CEO, unexpectedly stepped down from his job at the online restaurant reservation leader. Boomtown’s Kara Swisher reported that he is likely to take a job at Andreessen Horowitz, a major venture capital firm in Silicon Valley.

Up until this week, the company’s stock was something of a Wall Street darling.

Over the past year, the stock jumped 322 percent, trading as high as $118.66 at its peak. Today, the shares fell to as little as $87.23 during the day. In the past two days alone, the stock has lost almost $24 a share.

OpenTable said the company’s CFO, Matthew Roberts, will be promoted to president and CEO and will join the board. At the same time, Jordan will become executive chairman. The transition will take place on June 1. Roberts will also fill the role of CFO until a replacement is found.

The sudden departure led analysts to voice concern over the urgency of the changes, including Roberts’s ability to manage three jobs at once. The company also reported first-quarter results today that were in line with expectations.

Exclusive: OpenTable CEO Jordan Likely to Head to Silicon Valley VC Firm Andreessen Horowitz

Kara Swisher — Wed, 04 May 2011 05:28:00 +0000

Jeff Jordan, the president and CEO of OpenTable who unexpectedly stepped down from his job today at the online restaurant reservation leader, is set to take a job at a major venture firm in Silicon Valley.

Sources said Jordan has spoken to several major VCs about moving to their firms recently.

While Benchmark Capital was a big funder of OpenTable before it went public in 2009, sources said the likeliest home for the well-known Internet player–Jordan has also been a major exec at eBay–is Andreessen Horowitz.

The move would be a coup for the firm, which has been busy adding partners since its founding only a few years ago by Web icon Marc Andreessen and his longtime business partner Ben Horowitz.

Jordan’s announcement that he was leaving OpenTable today during its first-quarter earnings call caused the stock to decline precipitously today, even though he said he would remain active as executive chairman.

CFO Matthew Roberts was named as his replacement.

Explaining the move, Jordan said:

“I’ve been managing Internet businesses since 1999. That’s 12 years of being in the tornado, and it’s pretty exhausting. I’ll be looking at the next challenge, but in terms of operating an Internet business, I’ve scratched that itch very well.”

It’s an itch that he will be scratching as a VC apparently and likely at one of tech’s hottest firms, which has investments in everything from gaming phenom Zynga to social buying service Groupon to microblogging start-up Twitter.

A spokeswoman for Andreessen Horowitz declined to comment and Jordan has not responded to an email query.

OpenTable's Stock Tanks After Executives Play Musical Chairs

Tricia Duryee — Tue, 03 May 2011 22:19:49 +0000

OpenTable’s stock fell nearly $17 today to $96 a share following the release of its first-quarter results and word that the company will replace its CEO.

The online restaurant reservations company said the company’s CFO Matthew Roberts will be promoted to president and CEO and join the board on June 1. At the same time, Jeff Jordan, the company’s president and CEO, will transition to executive chairman.

In a conference call discussing first-quarter earnings, Jordan said, “I plan to have an active role. I’ve been managing Internet businesses since 1999. That’s 12 years of being in the tornado, and it’s pretty exhausting. I’ll be looking at the next challenge, but in terms of operating an Internet business, I’ve scratched that itch very well.”

Despite the management changes and stock drop, OpenTable’s revenue was pretty much in line with expectations and its earnings per share exceeded estimates. OpenTable earned $4.2 million, or 17 cents a share, on revenues of $33.7 million in the first quarter. Revenues were up 59 percent over the same period last year, and profits jumped by 65 percent.

The company said its two big areas of growth are mobile, which has now assisted a total of 10 million reservations, and Spotlight, which offers Groupon-like discounts at restaurants in 10 markets. On the call, Spotlight was characterized as being the company’s fastest-growing product ever. The company’s first-quarter results also include the acquisition of toptable.com, which operates internationally.

For some more perspective on Jordan, here’s an interview he did with BoomTown’s Kara Swisher in September.

[ See post to watch video ]

Presto Chango: KaChing Becomes Wealthfront

Kara Swisher — Tue, 19 Oct 2010 20:00:00 +0000

Today, the execs at kaChing, a social investing site, are ringing the closing bell at the Nasdaq–actually, it is more of a button-pushing–to herald in a complete shift for the Palo Alto, Calif., start-up.

That includes a new name for the year-old company–it is now officially called Wealthfront–which signals a focus on linking professional money managers to customers and a move away from the “American Idol” investor talent discovery approach that kaChing had been founded on.

Now, Wealthfront is trying to solve the thorny problem of delivering good investment advice and actionable tools online.

Using a “methodology of the Ivy League endowments, to identify which money managers will outperform”–sounds fancy!–Wealthfront has vetted 25 investor options to be offered on its platform for anyone with a minimum of $10,000 to sink into equities (no bonds for now).

It’s certainly an interesting, if risky, move, for kaChing/Wealthfront, which has garnered $10.5 million in funding from a range of big Silicon Valley names, such as Marc Andreessen and OpenTable CEO Jeff Jordan.

Thus, here is a video interview I did yesterday with CEO Andy Rachleff and founder Dan Carroll explaining it all:

[ See post to watch video ]

And here is the official press release on the switcheroo:

KACHING BECOMES WEALTHFRONT, APPEAL OF PERFORMANCE ATTRACTS MORE THAN $100M TO INVESTING SITE IN FIRST YEAR

Wealthfront Introduces Manager Recommendations, Makes it Even Easier for
33 Million American Households to Invest Well

Palo Alto, Calif., October 20, 2010–One-year after launching its investing platform, the company known as kaChing formally announced today that it has changed its name to Wealthfront and unveiled a host of new product features as the company continues to deliver on its promise to make it easy to invest well. An SEC Registered Investment Advisor, Wealthfront also announced more than 25 registered money managers have qualified and joined Wealthfront, and that it has attracted more than $100 million in assets to its investing platform.

Average American investors, made up of 33 million American households with a net worth of between $100,000 and $1.5 million, have collectively invested $7 trillion in the stock market. Yet the average American with a net worth of less than $1.5 million has long been conditioned to believe it is impossible to outperform the market. A recent study, commissioned by Wealthfront and conducted by telephone by Harris Interactive confirmed this attitude, finding that only 6% of all U.S. adults, and only 3% of those with a financial advisor, “strongly agree” that financial advisors know how to consistently outperform the market. This finding is unsurprising since access to quality money managers has been traditionally limited to wealthy individuals with a net worth of at least $1.5 million who can afford the high minimum investment requirements.

“People have been conditioned to believe outstanding performance is impossible, but we think it IS possible,” said Andy Rachleff, CEO of Wealthfront. “Everyone deserves a better way to invest, and with our ability to vet, select and recommend outstanding money managers for investors, we believe Wealthfront can meet this need.”

Wealthfront Managers Outperformed the Market in Last Twelve Months

Wealthfront has built its business on the fundamental belief that it is not only possible to consistently outperform the market, but that it is also possible, using the methodology of the Ivy League endowments, to identify which money managers will outperform.

Since launching as an SEC registered investment advisor one year ago, Wealthfront has applied its rigorous vetting process, for which an average of only one in ten managers qualify, to add 25 top professional money managers to its investing platform and make them accessible to anyone with a minimum of $10,000 to invest. Together over the past year, Wealthfront’s managers have collectively outperformed the S&P 500 by more than 6% net of fees.

Today’s announcement, that Wealthfront has attracted more than $100 million in assets to its platform, further demonstrates the company’s appeal to both average investors looking for a better way to invest and to top professional money managers looking to scale their business through cost-effective distribution.

“With Wealthfront, we can easily and cost-effectively access a new segment of investors by taking on accounts well below our historic minimums,” said Colin Higgins, president of The Golub Group, an investment management firm with more than $600 million under management. “There’s no reason average investors with a net worth of less than $1 million shouldn’t have more options to invest their money. Now with Wealthfront–they do.”

Recommendations Make Finding the Best Money Managers for You Easy

According to the Harris Interactive survey, about one in two U.S. adults believe they know how to evaluate financial advisors. Responding to the need to make it easier for the average investor to invest well, Wealthfront also unveiled today its new recommendation engine to match investors with the most appropriate money managers for them. Taking an algorithmic approach, Wealthfront first vets managers to qualify for its platform. Investors then answer a few short questions about their investing goals, and Wealthfront recommends the best money managers to suit their goals.

Meet the Yahoo Board: Something Old, Something New–But Will They Do Something?

Kara Swisher — Thu, 14 Oct 2010 16:00:49 +0000

With all the noisy swirl around Yahoo of late–from its executive turmoil to its flat growth to its dashed partnerships in Asia to its brash CEO–its board has been unusually quiet of late.

Comatose, some might say.

In fact, many do say exactly that, pointing to the trauma of their disastrous performance when they fended off a hostile takeover attempt by Microsoft (MSFT) for above $30 a share as the cause.

Since then, the stock price of Yahoo (YHOO) has been mired in the low teens.

That is, until yesterday, when even more rumors of new plots emerged in the media, with private equity firms, media companies, Web rivals, big shareholders, Wall Street and others all machinating about trying to grab all or some of the Internet giant.

Now, it will be interesting to see if its directors will shake themselves out of their typical comfort zone of inactivity to actually do their job.

Which, as former GE (GE) star exec Jack Welch–in a recent smackdown of a spate of controversial moves by the Hewlett-Packard (HPQ) board–said in a recent interview, is to “pick the CEO, help them shape strategy, make them feel good about themselves, and, if the CEO isn’t doing a good job, to ‘get them the hell out of there.’”

According to sources close to the situation, the Yahoo directors are in a quandary, even as they are on the receiving end of a flood of suggestions and demands from big investors, ranging from merging with AOL (AOL) to aligning with News Corp. (NWS) to selling off the company’s lucrative Asian assets to replacing CEO Carol Bartz.

You get the idea.

But that might not happen as quickly as some want. Sources said that while the eight-person board has some strong personalities on it, there is no one who has emerged as a powerful leader, aside from Bartz.

Yahoo has recently tried to attract two execs who might be able to go toe-to-toe with her–OpenTable (OPEN) CEO Jeff Jordan and Akamai (AKAM) President David Kenny–but was turned down by both.

Neither apparently wanted the headache of dealing with Yahoo’s struggles.

The same goes for some on Yahoo’s board.

Said one person who had spoken to a few board members recently: “Each of them tells me, ‘I’m only one person and I can’t act alone.’”

Indeed not, which is why you have a board. Stone soup, people!

In any case, it is high time to put the spotlight on the Yahoo directors, which I have done in the past in other crisis moments.

Here’s a rundown, with their photos from Yahoo’s shareholder Web site, along with some BoomTown analysis:

Carol Bartz, CEO:

We all know her, the tough-talking longtime Silicon Valley software exec who was brought in to clean up Dodge in the wake of the rocky tenure of former CEO and co-founder Jerry Yang. She is under pressure here for not doing that well enough, of course, despite a very, very big compensation package.

Still, with an aggressive personality and a wimpish board, she might be able to stave off any challenges to her power.

Roy Bostock, Chairman:

The longtime airline board member and advertising exec has been at the top of the Yahoo board since 2008 and on it since 2003.

Which is why I called for his resignation after Yang and former Yahoo President Sue Decker gracefully stepped down, after their management was called into question.

Bostock was right there with them, making all those decisions, which turned out to be disastrous in hindsight. Still, he does not seem to be much for the honorably-falling-on-your-sword thing.

In fact, sources said he has been making the rounds of investors recently trying to gauge the mood. Memo to Roy: It’s bad.

Eric Hippeau

Now the CEO of the Huffington Post, the longtime Web investor and publisher has a lot of online experience and should be one of the leaders on the Yahoo board. Hippeau has certainly been a director long enough to be one–since 1996, as an early investor in the company.

He’s also known as a super-nice guy in Internet circles, which means he is no head-smacker. Too bad.

One idea floated to me by an investor: Yahoo could buy the upstart online media darling and install him as CEO. Pretty please, because the entrance of the fab stylings of Arianna Huffington into this mess would send me into the stratosphere of reporting nirvana.

Vyomesh Joshi

Also a very endearing dude, the top HP exec was one of those on the short list for CEO of the tech giant recently. He runs its gigantically profitable printing and imaging business.

He’s been a Yahoo director since 2005 and should be a key decision maker, since he is an experienced operator. He’s not been, unfortunately.

Arthur Kern

Also a lifer, also having been on the Yahoo board since 1996, the investor and radio exec has also worked in marketing at Digitas.

Among the board members, he seems to be the quietest of the bunch, so I am not sure what to say about him except that he has very white teeth.

Gary Wilson

Another investor–in private equity, he has been on the board of airline companies (what is with this plane stuff on the Yahoo board?), as well as a top financial exec at Disney (DIS) and Marriott (MAR).

Again, a nice résumé, and he should be a leader. He was definitely more involved in the Microsoft situation than others.

Since then? Meh.

Sue James

The accountant. Retired from Ernst & Young. Used to work for Bartz, as lead partner for audit work for Autodesk (ADSK). Joined the Yahoo board early this year.

Probably just figuring out that this whole thing might not be adding up.

Patti Hart

Also new, since June. Worked in the digital video business, and is now the CEO of a “global provider of electronic game equipment and systems products.”

Say what?

Okay, I will go with it, as I am liking that Bartz has brought on two women to the board, which has mostly been stacked full with men.

Brad Smith

The president and CEO of Intuit (INTU), the financial management software powerhouse, also joined in June. This guy should be able to shake the trees, right?

But he is probably still trying to learn everyone’s name. Brad, not to put too much pressure, but everyone is counting on you.

Jerry Yang

Last, but certainly not least, the man who is ultimately the power player here.

The Internet pioneer and industry legend checked out of Yahoo for a bit after he stepped down in early 2009–time to tee off!

But many sources said he has been back at Yahoo for a while–glad-handing advertisers, meeting with entrepreneurs, sussing out trends, piping up in strategy meetings and doing the behind-the-scenes thing that he does so well.

Reports vary on how much he likes Bartz–he expresses support for her to some, but seems to have soured on her to others.

Who knows with the endearingly prickly Yang, whom I have been covering for a dog’s age and who should return my emails once in a while, like in old times when I stalked him.

Dinner is optional, but I will pay this time (see video below of our last semi-enjoyable meal).

Still, here is what I know for sure: Yahoo is Yang’s creation and legacy, and he’s the one who has to make sure that it survives and thrives.

For all the uncertainty surrounding Yahoo once again, that much is true.

[ See post to watch video ]

OpenTable CEO Jeff Jordan Talks About Groupon, Mobile Growth and Why IPOs Aren't That Scary!

Kara Swisher — Thu, 09 Sep 2010 12:38:23 +0000

It was certainly high time that BoomTown made a reservation–oh, I had to make that pun–to check in with OpenTable (OPEN) CEO Jeff Jordan.

The well-liked and voluble Silicon Valley exec–who had worked in a top job at eBay (EBAY) before moving over to the online restaurant reservation service and taking it public last year–has actually been up to a lot recently.

That includes a discount-coupon program that was just rolled out called Spotlight, which Jordan doesn’t even try to pretend is not a copycat move to take advantage of all the excitement around Groupon.

And there has been more, from adding restaurant reviews to a cloud computing offering to, most importantly, a big push for its mobile apps, which have been growing wildly.

Jordan also discussed how leading a public company has been going, especially since many Internet outfits have been avoiding the prospect.

So far, the company’s post-IPO life has been going well. OpenTable stock has been performing strongly this year, up 118 percent in the year to date, compared to many more lackluster performances in the sector.

Jordan, who had been in consideration for many big Internet CEO jobs, talks about all this and more in the video interview below:

[ See post to watch video ]

Will OpenTable Be Just What Silicon Valley Ordered This Week?

Kara Swisher — Mon, 18 May 2009 10:35:54 +0000

One of the first Silicon Valley start-ups to go public in a long while–OpenTable–is expected to come to market this week, with venture firms hoping it will prove a tasty treat for Wall Street.

Whether the $42 million initial public offering of the online restaurant reservation service proves to be a bellwether or not is unclear since its business has–despite strong revenue gains over the last two years–run up operating losses for much of its lifespan of 10 years.

OpenTable’s last three months of results, though, have seen a small profit. It makes money primarily from fees from restaurants it gets for a variety of services.

Revenue for 2007 was $41.1 million and for 2008, $55.8 million.

OpenTable is most definitely a creature of Silicon Valley. Its CEO, Jeff Jordan, is a former top eBay (EBAY) exec, and one of its VC backers is Benchmark Capital, among others. Its venture funding has totaled about $50 million.

Barring any unforeseen circumstances, the San Francisco-based OpenTable is expected to price from $12 to $14 a share and then begin trading on Nasdaq under the ticker stock symbol OPEN later this week.

Proceeds from the sale of three million shares, OpenTable has said in regulatory filings, will net it about $16.1 million, with 48 percent of shares being sold by existing shareholders.

The IPO, underwritten by Merrill Lynch & Co., would value the company at about $280 million, which is about five times its 2008 revenues.

(You can look at OpenTable’s initial public filing in January about the IPO here.)

Yahoo CEO Countdown, 26 Days to Go: As Chernin Declines, Will a Dark Horse Emerge?

Kara Swisher — Fri, 05 Dec 2008 15:24:33 +0000

[UPDATED: H-P exec Todd Bradley has been a public company CEO, which I reflected below correctly.]

With Yahoo board Chairman Roy Bostock reportedly assuring investors and others that the company will have a CEO in place by the end of the year, it seems prudent for BoomTown to initiate an official Yahoo CEO Countdown.

After all, this column had a 100-Day No-Sacred-Cows Vision Quest to mark the time that Jerry Yang said he needed to give Yahoo a top-to-bottom look-see when he took over last summer as CEO.

Yang announced he was stepping down on Nov. 17, prompting the search for someone to lead Yahoo (YHOO) to the promised land where BoomTown countdowns are illegal.

But that’s not today, so here’s the 26-days-to-go update:

It looks like Yahoo has almost no chance to nab a top candidate, News Corp. (NWS) COO Peter Chernin. While Yang made nice and Bostock quickly lobbed in a call to get the well-known exec to come in and talk, several sources said Chernin declined even that.

Of course, moguls like Chernin are pros at not interviewing–one media player schooled me that you apparently never show interest in a job and only take it if a full offer is made, because if you don’t get it after chit-chatting, you look like a loser.

But I don’t think it is a slick feint on his part, even though Chernin is now engaged in contract renewal negotiations at News Corp. (which owns this Web site).

Consider: If you were Chernin, would you want to trade your powerful, well-paid, glamorous job in Hollywood and New York for what will surely be a slog of a job in Sunnyvale, and in a cubicle?

And Chernin has told many he is not interested in doing the job, although News Corp. would still love to do some sort of deal to combine its online assets, like MySpace, with Yahoo’s, as it almost did many times.

While Chernin did just take delivery on a Tesla, showing some clear geekiness, and he would be an exciting get for Yahoo, it’s the longest of shots.

The same is true for some other names that have been floated (by me!).

But several of the people are on the Yahoo board’s list too. And while things can change, it is more unlikely any of them will be the pick.

That includes former Yahoo COO Dan Rosensweig, who has a good life now as a media investor; former eBay exec and OpenTable CEO Jeff Jordan, who told his investors he does not want to be in the running and was sticking with the start-up’s IPO plans–if and when the economy recovers (although Yahoo could buy OpenTable and, thus, Jordan); former eBay (EBAY) CEO Meg Whitman, who could be running for governor of California; and former AOL CEO Jon Miller, who is not secretly buying Yahoo, but who could not be its leader anyway, since he is bound by a Time Warner (TWX) noncompete agreement until the end of March.

Another sticking point: The Yahoo board has limited the pool by a list of six criteria that it has drawn up, with the No. 1 being a CEO candidate has to have public company CEO experience.

If enforced, that nixes some folks, like Google (GOOG) exec Tim Armstrong. In addition, Yahoo President Sue Decker getting the nod is even more unlikely, for that and other reasons, according to many.

From my lists, that leaves DoubleClick head David Rosenblatt (his company is now owned by Google); Demand Media’s Richard Rosenblatt; former Viacom (VIA) head Tom Freston; former CNET CEO Shelby Bonnie; Hewlett-Packard (HPQ) exec Todd Bradley; and Juniper Networks (JNPR) CEO Kevin Johnson, who was the Microsoft exec who was key in the Yahoo takeover attempt there.

All have reasons not to either want or be able to take the Yahoo CEO job, so that means there could be a dark horse candidate. (I am now drawing up yet another list of qualified public CEO tech and media execs).

Here’s one: Yesterday, after it was announced he was stepping down from Microsoft (MSFT) in the wake of its hire of former Yahoo tech star Qi Lu as its online leader, I noted that I liked Brian McAndrews for the job.

Plus, the former CEO of aQuantive, which Microsoft bought for $6 billion last year, would be a delicious irony. But those who have talked to him told me McAndrews–who did want the digital head job at Microsoft and was left hanging by the software giant’s CEO Steve Ballmer–seems intent on taking time off now.

Alternatively, one of the two Yahoo board members, Maggie Wilderotter or John Chapple, both have the public company CEO checked off.

Personally, I am betting on one of them as CEO, although I believe it would be better if Yahoo picked a fresh outside choice.

So do a lot of execs remaining at Yahoo, most of whom visibly roll their eyes at the idea of a board member taking over, considering the record of the directors so far in guiding Yahoo’s fortunes.

That’s why the board–which definitely has not distinguished itself by any criteria so far in Yahoo’s long fall from grace–should try to get it right this time, as Yahoo can’t take any more of the way it has been running the show so far.

More CEO Choices for Yahoo: Freston, Jordan, Bonnie and Two Rosenblatts!

Kara Swisher — Wed, 19 Nov 2008 08:00:08 +0000

BoomTown might have been remiss in my post yesterday on top candidates for the Yahoo CEO job, after the news Monday that Jerry Yang is stepping down, by leaving out several key possibilities.

Yesterday’s roster included News Corp.’s Peter Chernin, Google’s Tim Armstrong, Kevin Johnson of Juniper Networks (JNPR) and also two Yahoo board members, among others. (The main internal candidate, Yahoo President Sue Decker, seems unlikely to get the nod.)

So here is an addendum to my initial list–all of whom are Yahoo (YHOO) outsiders.

Tom Freston:

Chernin is not the only media mogul whose name is being bandied about–the other prominent one is former Viacom head Tom Freston.

Freston apparently got shafted by the–let’s be polite here–disturbingly volatile founder of Viacom (VIA), Sumner Redstone, for not buying MySpace. In fact, News Corp. (NWS), which also owns this Web site, did. But Freston remains a well-respected and creative exec and has been dabbling in the Internet space since leaving Viacom.

Also, Oprah and Arianna love Freston–which is all I need to know.

Jeff Jordan:

Jeff Jordan, the former top eBay (EBAY) exec who is now the CEO of OpenTable, was also on the short list for COO at Facebook, a job that went to former Google exec Sheryl Sandberg.

While the restaurant reservations Web start-up has been headed for a public offering, that event has obviously been pushed out indefinitely by the econalypse, which might be just the impetus to convince Jordan that bussing tables all day is too dull.

Some speculate that Yahoo could buy OpenTable and get Jordan in the process.

Richard Rosenblatt:

Another interesting idea is Richard Rosenblatt of Demand Media, a company that Yahoo was sniffing around not too long ago.

The network of social-networking sites and apps maker is an innovative play in the space and might give Yahoo some much needed Web 2.0 DNA. Demand could still be bought by Yahoo, in order to put Rosenblatt into place.

(Rosenblatt, for those who do not remember, ran the company that owned MySpace, and he was key to selling it to News Corp.)

Also, Lance Armstrong likes Rosenblatt.

Shelby Bonnie:

A reader actually made the excellent suggestion of former CNET head Shelby Bonnie, who is now investing in start-ups. Bonnie is another steady exec–despite leaving CNET, now owned by CBS (CBS), under an options backdating controversy–and is well-liked in the Internet industry.

Yahoo would be a much bigger job than he has ever held, although he certainly has both tech and advertising experience online.

David Rosenblatt:

Lastly, especially if Yahoo is interested in an exec who has turnaround talent, there is probably no better a choice than DoubleClick CEO David Rosenblatt. An experienced online advertising exec, he is also sharply outspoken and knows how to get companies in line and fast.

He is also impossibly rich after Google (GOOG) bought DoubleClick out from under–wait for it–Yahoo recently. While he is still running the show for Google, after having decided to stay, Yahoo might present an interesting challenge for the very savvy Rosenblatt.

Please see this disclosure related to me and Google.

Yahoo Board and Investors Burn, While Everyone Else Fiddles

Kara Swisher — Mon, 30 Jun 2008 23:09:27 +0000

Could Ross Levinsohn and Jon Miller reinvent Yahoo (YHOO)? What about OpenTable’s Jeff Jordan? Or various and sundry Google (GOOG) or Microsoft (MSFT) execs?

It could happen.

That specific scenario of putting someone like the two former Internet execs (they ran Fox Interactive Media and AOL, respectively) in charge of the troubled Web giant is one of the many being bandied about, as Yahoo shares tumble and the company heads toward a potentially ugly annual meeting everyone involved desperately wants to avoid.

In fact, Yahoo’s board and major investors are talking today about various options for the company, including Yahoo’s receptivity to a sweetened deal with Microsoft and also other ways to pull the asset-rich company out of its stock doldrums.

It is not likely to be a very chummy meeting, of course, considering Yahoo’s stock (see this depressing chart to the right) has been drifting inexorably downward with nary a lifesaver in sight.

Yahoo shares sunk ever closer to $20 (it closed today at $20.66, down more than three percent)–a worrisome crossing of the digital Rubicon for the company, given that it makes Yahoo more vulnerable to all sorts of Wall Street machinations.

Besides allowing other large companies like News Corp. (NWS) and Comcast (CMCSA) to consider bids for Yahoo–both have been watching the situation very carefully, sources said–it also opens Yahoo up to attacks from more rapacious private equity investors.

And there is a lot of machinating already, of course, as I have found poking around, with more to come.

Like what?

Like Yahoo back in discussions with AOL once again. Sources close to the situation said that the idea of hooking the pair up have been revived, as Yahoo looks to strengthen itself and Time Warner (TWX) searches for any way to spin off a division it has never been able to juice up.

Of course, Microsoft has also been sniffing around the property too–and almost bought AOL several years ago–and would be unlikely to sit still and let Yahoo grab AOL’s most attractive asset, its Platform A online advertising unit.

(Memo to Time Warner CEO Jeff Bewkes: You’re known as a smooth deal-maker, so paste on that million-dollar smile and get dealing!)

And, more interestingly, are the moves to try to find another CEO and top leadership to come in and run the company instead of Yahoo CEO Jerry Yang and President Sue Decker.

(I had previously posted on possible picks for that job here.)

That could come in either a friendly or non-friendly approach, according to several people close to the situation.

Under the friendly scenario, Yang would voluntarily step aside–and even be upped to non-executive chairman status–while a new CEO and team would be put in place.

A less dulcet approach, which would require an aggressive move by Yahoo’s board–who make head-in-the-sand ostriches seem active–against Yang directly is less likely.

Still, many investors, increasing numbers of employees and even some Yahoo board members have lost confidence in Yang and Decker, who have been trying to set a new course for the company.

But does a new course require new leaders?

Levinsohn and Miller (pictured here, left to right), who now run an online-focused investment fund called Velocity Interactive, are two high-profile former Web execs mentioned most frequently by major Yahoo investors as candidates for that idea.

Sources said could either come in as board members or actually run the company for a time period, while searching for a new CEO, like OpenTable’s Jeff Jordan, Google’s Tim Armstrong or even Microsoft’s Kevin Johnson.

Such as plan could include additional investments by new investors and critical buy-in by current investors–including billionaire activist Carl Icahn, who is waging a proxy fight against Yahoo that is set to come to a head at the Aug. 1 annual meeting.

Most important would likely be cooperation from Microsoft too, which could offer to also buy some of Yahoo and also sweeten its search-ad deal.

It would also require a new plan for Yahoo, which will likely include job cuts and a more drastic refocusing of its business that perhaps only outsiders can do.

As its founder, not surprisingly, Yang has been slow to make the kinds of deep changes many think Yahoo requires to reinvent itself, and Decker has been part of the team that has gotten the company mired in its current state.

While this all sounds incredibly complex, all scenarios point in one inevitable direction: Massive change is coming to Yahoo in the next 30 days, one way or another.