Category Archives: Financial

Beijing Startonomics: Chinese VC Panel

Posted on June 10, 2009 | Leave a comment

Moderator:  David Wolf,   CEO    Wolf Group Asia

 Panel:

 

Q: How has the global financial crisis affected the VC climate in China?
A: Exactly the same as the US.  Not going to bother paraphrasing.

Q: What makes a Chinese Entrepreneur better / different?
A: US: decks are well structured, CEOs are polished and sharp.  CHINA: much younger, more grass-roots entrepreneurs.  
     US: ready, aim, fire   CHINA:  ready, fire – go see what you killed    US: still in the bunker figuring out what to shoot

Q: Advice to / opinions of expat entrepreneurs? 
A: Tend to only invest in experienced Chinese entrepreneurs. 
     Understanding of Chinese culture (to know your users) is a requirement 
     More attractive:  Chinese who leave, learn in US, come back
     IP + good approach to business model coming to China from another country  

Q: Post-Series-A, what does the cap structure look like between Founders / VC /  employees?
A: Chinese founders will typically own more than in US.  This is because of Chinese culture.  Talent/engineering cost is very low.  Angel round will get a company to 20-30 employees.  Also, companies need less cash so founders end up keeping more.  (lower cap-ex)

Q: What are the exit strategies here in China and what are the corresponding legal hurdles?
A: Shooting for overseas IPO or M&A.  Company will be owned by a holding company based off-shore.
     China working on a NASDAQ competitor starting Q1 2010 (Jimbot (sp?))
     Trading volume in China is already 4x Hong Kong’s
     PE ratios higher in China as well.  All of this should help more local IPOs
     Chinese consumers understand the concept of investing, also helpful     

Q: How are Chinese entrepreneurs connecting with VCs (is there an angel/incubator equivalent in China?)
A: Events & conferences, lots of demos in China.  Not many incubators yet.
     There are some angel groups in Shanghai – not making a lot of progress yet.  60 angels ~ 4 deals.  Each angel is committed to invest $5k/year = lots of startups. 

Notes:

  • 1-5mm fetching about 10-40% of a company normally here. (Softbank – backed by Cisco)
  • Funds are preserving so they can do follow-on investments for their portfolio companies
  • 15 person company buring 12k/mo in China – 2nd largest language learning company in the world
  • in RMB investments there is no concept of preferred / common stock
  • Must have an RMB fund on-shore to invest in China
  • There are constraints on equity ownership by foreign investors.  Forces investors to localize
  • There are still unclear tax issues after liquidity events in China
  • It’s about investing in people, just like in the US
  • Retaining people is key – much harded to do in China – competing with the big, stable companies.  An investment in a charismatic, likeable leader carries a lot of weight
  • “You’re ATM card is less secure than your online gaming account in China” – the gaming acct has a lot more value built in
  • Service-based innovation in the US tends to be based on core technology innovation in China.  Example:  Kindle developed in China, commercialized in US.
  • Orange:  in China to find business model innovations to bring back to Europe.  
  • Behavioral targeting on the Internet:  US you get in trouble (Beacon?) – in China it’s coming out of Government / University labs.
    - Chinese gov’t is motivated in tracking people and their habits whereas US gov’t is not.  
     

→ Leave a comment

Posted in Financial, goap, Internet Business, Investing

Tagged

Tokyo Startonomics: Eric Ries on Lean Startups

Posted on June 9, 2009 | Leave a comment

Eric’s blog:  startuplessonslearned.blogspot.com

Twitter: @ericries (tag with #leanstartup)

Presentation Notes:

  • Most startups fail catastrophically
  • How many startups have lived up to their employees, founders and investors?
  • Most startups that succeed turn out to be something totally different from the initial vision of the company
  • Difference between a successful startup and a failure is the number of iterations the company could afford before death / success
  • Eric’s new company – IMVU – bring avatars and digital goods to the USA

IMVU:

  • shipped in 6 months – a horribly buggy beta product
  • charged from day 1
  • Visionary Customers can be just as or more valuable to the business as the founders
    - must be in constant dialog with those visionary customers
    - those visionary customers live with the same pain that the founders did when they came up with the business idea
  • Iterate constantly.  IMVU pushes to production 50x per day
  • No PR, no launch
    - this way you only focus on what your customers think
  • 2007 revenues of $10mm, still growing nicely

Lean Startups Go Faster

  • Full-scale refactoring of how software is developed.
  • Commodity technology stack – easy, cheap: EC2, grid, cloud, etc etc
  • Customer Development (find out what customers want before you build it)
  • Agile (lean) product development (fast iterations)
    - Principles drawn from Lean Manufacturing and Toyota Production System
    - Where problem is known but solution is not
    - Meetings are waste, revising code is progress
  • Product development at a lean startup:
    - problem and solution both unknown
  • get rid of departments.  2 teams:  problem team, solution team
  • Problem team constantly asks what the problem is and is there a business here if we can solve it?
  • Solution team constantly asks what the problem is and if the product is sufficiently solving it (constantly iterate)
  • The biggest source of waste in any startup is building something nobody wants.

 

Disclaimer (AJ):  My notes don’t do Eric’s presentation or concepts justice.  Please watch Eric’s recorded presentations and look at his actual slides.

2009 05 21 The Lean Startup At SIPA

→ Leave a comment

Posted in Financial, Internet Business, Investing

Tagged , ,

Tokyo Startonomics: US Startup Investment Market

Posted on June 9, 2009 | Leave a comment

This perspective is from the smaller seed / angel investor perspective.

Panel: Dave McClure, Joyce Kim, Ryan Pipkin, David Troy

 

  • Downturn has been worse for VCs than for startups (harder for VCs to raise money relative to the valuation hit for startups)
    VC as an asset class has performed terribly and many of their LPs are “overweight” in the class.  All bad for VCs
  • Lots of VCs will be disappearing over the next few years.  The good ones will survive (CRV, August, etc)
  • New environment:
    - more focus on getting revenue, get to break even cash flow
    - get to sustainability on the Series A so you don’t have to raise money later (usually won’t be the case)
    - Seed Funds (SoftTehc, Maples Investments), and Incubators / Angels (YCombinator, TechStars) are gaining traction in this environment
    - much cheaper to prove concept these days – < $50k 
  • Troy – making 100-250k investment in 1-3mm pre-money companies in BWI area only
  • Pipkin – makes software that helps angels manage / syndicate their deals.  
  • Angel Capital Association: 160 member organization of angel investor groups
  • Due diligence process is much more arduous now
  • Startup valuations down 33-50% on average in the Valley
  • VCs taking 50% longer to close investments, on average
  • Legal:
    - not a lot more convertible notes going around (except for McClure)
    - they’ve started capping these notes (cap the Series A valuation) in the last year and a half
    - terms are very pro-investor.  Less term sheets, less room for negotiating
    - easier to take a board seat on A round or get a liquidation preference
  • Series B’s are impossible to do right now.  Best you can do is likely 50% down round or worse.  Many are dying now – too speculative.
  • Trend for Micro-Seed ($0-$100k to get a prototype built and start proving a market):
    - panel is bullish on micro-seed model
    - Pipkin:  there may too many micro-seed incubators out there, Paul Graham has a secret sauce 
  •  Troy:  You have just as good a chance at good returns in a small startup than you do in the public markets
  • Panel agrees outlook for Angels are looking much better than VCs right now, at least from an ROI perspective
  • Kim:  Seed round expectations have completely changed.  Try-and-see not as viable now – must be building a real business.  Less R&D investments.
  • Is there still room for no-revenue, pure-growth companies in the VC model?
    - Kim – not really, unless it is a proven entrepreneur
    - McClure – seed yes, VC less so
    - Concensus: we must be at break-even by next round.  We’re basically bankers now.  
  • Net-net:  Fail fast and move onto the next one.  Don’t waist too much money proving/disproving what you think will work.

Startonomics / Startup Metrics:  (Dave’s AARRR)

  • Acquisition:  what channels do customers come from?
  • Activation: do they have a good 1st experience?
  • Retention: will they come back?
  • Referral: do they tell other people (net promoter score)
  • Revenue: will they pay / how to make money?

       – crucial for startup to track these things to take some of the risk out of the business for their investors.
       – We’re seeing the professionalization of the low end of the investment market

Q: How do angels feel about a quick exit at a smaller valuation (as opposed to the larger, follow-on deals ending in larger exits)
A: There is more of an oppty for angels and seed funds for deals like these since the VCs aren’t interested in them.  It really depends on the fund size … all about ROI.  Someone managing a 10mm fund would be happy with a smaller exit. 

The slides:

US Investment Markets (Startonomics Tokyo, June 2009)

→ Leave a comment

Posted in Financial, goap, Internet Business, Investing

Tagged

Tokyo Startonomics – USA's turn

Posted on June 8, 2009 | Leave a comment

Panel:  Dave McClure (Founders Fund) , Dan Gould (Fox Interactive Media), Bradley Horowitz, VP at Google 

  • Social gaming platforms slowly becoming more popular in the US
  • McClure: Features really don’t matter that much  (on platforms)
  • monetization/distribution is more important
  • Looking for the intersection of users and money
  • Throwing traffic at an uncompelling feature won’t help it.  It will go away as soon as you turn the traffic off.  This is how Yahoo! has been attempting to grow the popularity of some of their features.
  • Top 3 Social Platforms in the US:  FB, MySpace, Twitter … also, the Web as a platform
  • Gould: “It’s a mistake for FB to spend too much time copying twitter” … FB a lot more personal, that’s its strength.  
  • Would make more sense for MySpace to have more asymmetric features (like Twitter) because of the “broadcast” nature of MySpace
  • How much $ would you allocate to the FB ecosystem as opposed to the Twitter ecosystem (companies built on on those platforms):
  • Horowitz:  I”d give it to GM (hehe) … correction, Google Wave
  • Gould: All on FB because it has a lot more mainstream stay than Twitter (even in the long run)   [I agree]
  • None of the top payment gateways in US (eBay, Apple, AMZN) are social networks.  Why not?
    … because they have “shit people want to buy” (as to say they don’t need social networks).
    Google basically has all those pieces in place (socail + payment).
    Horowitz: Who you know and who your friends are may or may not be important from a purchasing standpoint 
    Gould: “You can buy music on MySpace … but the US should learn from Japan on social payments”

Mobile Wars in the US (iPhone, Pre, Android, RIM)

  • iPhone is the leader because of a superior phone, superior platform … Steve Jobs bullying AT&T as opposed to the other way around (traditionally)
  • Why has Android not dominated the market:  too early in Android’s life.  Android is still very much a work in progress.
    GOOG trying to get competitors to use better browsers, raise the bar for technology (cites Gears and Chrome as filling the holes in browsing experiences)
  • “What’s good for the Internet tends to be good for Google”

 

  • McClure: Why aren’t there social networks around Moms/Kids/Families?  
  • Huge oppty to figure out how to organize those groups that want to connect to each other (play dates, etc) to help figure out where the “family spend” goes (strollers, schools, etc etc)

Passion:

  • Gould: When you have communities of people that are passionate about a particular topic, you end up with highly active forums (the dark matter on the Internet)
  • These sites aren’t collecting hundreds of millions of users but are making good money and are able to sustain
  • Ning is making inroads here by allowing social networks be created around niche verticals
  • Panel seems to agree that the silo’d social networks will continue to co-exist with the macro-network (MySpace, FB)
  • Gould: sometimes barriers can be good — bad UI and slow pageload keeps only the true enthusiasts on board – keeps content high quality
  • Gould: we need more hardware in the US that can help link the online and offline worlds.  The stored value cards in JP are very effective.

The slides from Dave: 

Overview of US Platforms & Social Networking (Startonomics Tokyo, June 2009)

→ Leave a comment

Posted in Financial, goap, Internet Business

Tagged ,

More from Tokyo Startonomics: mobile ad networks, games and auctions.

Posted on June 8, 2009 | Leave a comment

Gaming Trends (in Japan and Globally):

- video game market is becoming mature
- it’s a hollywood like business model now.
- costs $30mm to make a game which puts break-even at 3mm units.  Go big or go home.
- other mediums (mobile / pc) more like the broadcasting business (as opposed to hollywood)
  -  easier to fine-tune, lower cost, much more revising the experience, etc.  (long tail gaming)
- casual gaming demographic is changing a lot – tilting older and more female

Presenter: Moba-ge-town (DeNA Co) 

- Founded in Tokyo, March 1999
- Mobile portal, ad network (mobile), e-commerce
- New business:
 - AirLink (travel agency business)
- > 500mm pageviews / day (largest in JP)
- Virtual SNS with high quality free games
- over 70% penetration among teens
- stickiness & addictiveness (70% new user return rate)
- USD$200m annual revenue – 70% profit margins 
 - Ad revenue (place ads and pay sponsor fee)
 -  ”Success-based ad revenues” – basically a CPA model / affiliate program
 - Sales of avatars (virtual goods)  - 2D and 3D avatars
 - Display ads are 40% / the rest is 60%.  Virtual goods a small piece right now.
 - main user base in their 20s 
 - “Tie Up Ads” – national brand advertising.  Coca-cola, etc.
  - end user goes to the retail store, buys the can of coke.
  -  user takes pic of can with phone, uploads it (2D barcode)
  - DeNA sends uesr’s info to coke so coke can market to them
  - Coke gives the user coupons, targeted messages, etc
- Mobile payment system key to all of these businesses

 

- Mobile auction service: Mobaoku
 - very popular for buying/selling items via mobile phone
- Talk about boot strapping – Moba-ge-town was started by 3 staffers (1 engineer) in 3 months

→ Leave a comment

Posted in Financial, goap, Internet Business

Tagged

Social Investing and Pump-and-Dump 2.0

Posted on April 1, 2008 | 1 Comment

For the better part of the last 10 years one of my hobbies has been sampling the best the Internet has had to offer in investment research tools. I’ve dabbled in developing my own technical analysis algorithms, have done a fair amount of day trading and have taken some more traditional long positions in companies I believed in. Online investment tools have come quite a long way over the years, but one of the recent fads that the “Web 2.0″ wave of innovation has brought us is the concept of social investing.

Social investing sites such as Covestor.com, Cake Financial and several others have done a great job of bringing all types of (typically) non-professional investors together. Their sophisticated platforms allow members to enter their brokerage account login credentials (a little scary, but most of us swallow hard and do it anyway out of curiosity) in order for the site to “verify” your trades. Your trading activity is downloaded into the database and the site assigns a percentage of your portfolio each equity occupies. The number of shares (amount of cash you’re playing with) is not published in order to protect your privacy. The idea here is that, because the equities are verified by the site to exist in the member’s brokerage account, full-disclosure is satisfied and anything that member writes can be judged fairly by the readers. Many of the more active members on these sites keep blogs and write publicly-viewable messages about their rationale behind trades. In fact, when Covestor detects that you’ve made a trade in your brokerage account, they will email you asking for your rationale in the form of a mini blog post on covestor.com.

So, the first thing I did was pick the top 3 or 5 members on Covestor as ranked by their portfolios’ performance. The site has very nice graphs that show members’ performance against other indices like the S&P 500. After following a few of these members I noticed that a lot of their trades were solid (and common) like BUY APPL @ 110 or other fairly safe bets. This made their track records look decent and they typically edged out the market. Other equities they had would typically take up < 10-15% of their portfolio and would be very small-cap companies. These stocks would have a lot of blog posts associated with them and you could see the record of the member buying the stock all the way down a hill, often with comments to the effect of “time to load up, this one is on sale”, etc. Any time there was a pop in the price, you might see something to the affect of “you like that 200% gain today? More where that came from!”. But, the overall performance of the stock since the member initially bought in would typically be abysmal. Often you’ll see other members posing (publicly viewable) questions to the trader to the effect of, “I see you’re taking a bath on XYZ but you keep buying it up … you must have some inside info”, etc. That is often enough to get the degenerate-gambler-day-trader to jump in on the action and wait for that next 200% pop.

The first few of these I encountered made me think, “Well, the guy obviously believes in this stock because Covestor verified his ownership of it”. But, Covestor and others don’t publish how many shares the member owns! This trader could own literally 1 share to begin with and then keep buying 5 or 10 more as the price drops just to back up his public enthusiasm about the “sale”. Then, in another brokerage account not connected to Covestor (and therefore not publicly viewable), he may be making very different trades.

Call it pump-and-dump 2.0. It’s analogous to how the spam kings of yesteryear would pump penny stocks for a week then dump them after enough suckers bought in. I think Covestor and others are great sites with impressive platforms and very innovative features. The first one who figures out how to solve this problem, though, will certainly have the advantage. The only way I can think of off the top of my head would be if the site were to award different “badges” to positions in a trader’s portfolio. One badge could signify that the position is in excess of a certain dollar amount (proportionate to the share price). This would give users that track the trader a little more comfort in knowing that this is less likely to be a pump-and-dump trader.

→ 1 Comment

Posted in Financial, Internet Business, Investing

Tagged , , , ,

You May Want to Call American Express After Reading This

Posted on January 24, 2008 | 7 Comments

I have a PO Box that receives all of my bills, etc. because for some reason I felt that USPS would be reliable in this domain where they have failed in so many others. When I visit the post office to fish mail out of this box every two weeks or so it is invariable overflowing with direct [junk] mail advertising. I’ve used services like CatalogChoice.org to successfully end delivery of unwanted catalogs and some of the mail is from organizations that I’ve donated money or property to (which is sad because now when I get ready to donate to an organization that I haven’t donated to before I get a flash of my overflowing PO Box getting fuller yet). None of these junk mail sources, however, compare to the venerable American Express marketing machine. I am a card holder of their’s but am on the paperless billing system so literally none of the mail they send me has anything to do with my account. In fact, they often try to get me to sign up for the very card I carry in my wallet. I get probably 10-15 pieces per month from them ranging from credit card offers to vacation offers to mortgage offers.

Having recently been inconvenienced by this waste of paper and time spent at the post office, I decided to give their general customer service line a call (800-528-4800) to see if there was anything I could do to stop the flow. Their always-friendly agent responded immediately to my request to be removed from the direct mail list as if she’d been training for it for months. She then went into script mode and quickly read me the list of things I was being opted out of. Within seconds I zoned out and tried to politely let her finish (for some reason I feel guilty hanging up prematurely on overly-polite customer service people). A few key words in her monotone caught my attention, though, so I grabbed a pen and asked her to repeat the list, more slowly this time. Here is how it read:

“You are now being opted out of the following programs with American Express:

  1. Telemarketing
  2. Banking offers
  3. Offers from 3rd parties (little scary)
  4. Amex news (huh?)
  5. Affiliate sharing of credit history & report (WOW)
  6. American Express sweepstakes”

The entire call took about 3 minutes and after letting my mind wander on #5 for another 3 minutes, I decided to post this entry.

Incidentally, this got me search for other opt-out stories and I came across this nice and compact opt-out script.

→ 7 Comments

Posted in Financial, How-To

Tagged , , , , , , , ,

Still Watching TV From the Couch, but With Content Owners & Distributors Being Paid Differently

Posted on June 20, 2007 | 2 Comments

Any time I get frustrated with how something works in my day-to-day life I start thinking about how some day, years from now, I won’t be afflicted by this incessant inconvenience. Television and online video watching is high on the list of things that can (and will) be done drastically better some day.

There is a lot of noise in this very interesting space right now but only a few devices and services that I think have a real chance of changing how the average American television viewer consumes content.

The Devices

  • TiVo makes the best DVR on the market but has priced itself out of orbit with its near-$1,000 hi-def unit. Their box is Internet-connected (sans-PC) and already has limited access to a handful of video podcasts. If they don’t dramatically drop the price, they’ll continue to lose market share. I own a standard-definition box of theirs and its currently unplugged and sitting in the closet. I didn’t pay $2,000 for a hi-definition plasma so I could watch a standard-def, analog cable signal. Another TiVo handicap is that one cannot access VOD services like Comcast’s OnDemand, which let you watch TV shows or movies (hi-def) whenever you like. I am an avid OnDemand user and would not use a device that couldn’t access that service.
  • Motorola and Scientific America make severely crippled DVR’s with no Internet connectivity and a soul-crushing user experience. These little boxes of terror are distributed for a nominal monthly “lease” fee (typically $5-$10) via the major US cable operators like Comcast and Time Warner. To add injury to injury they even run ads in the program guide. I pay the $10 monthly fee for one of these boxes from Comcast, though, because it’s the only way I can have my hi-def content record to a DVR (without giving TiVo $800 + $16.95/month) AND access OnDemand VOD.
  • Apple TV is a slick little device that syncs music, photos, podcasts, movies and TV shows from a computer (PC or Mac) running iTunes for playback on your hi-definition set. All for $300 (40gb). It can stream or store locally almost any of the content you have in iTunes. I’ve been using the Apple TV (connected to my receiver via HDMI) as my stereo and primary conduit for watching video podcasts. If you buy an episode of a TV show from iTunes, you may also watch it on this device. So, this is (for now) primarily an everything-but-TV device (since you’ll be able to rent movies soon through the Apple TV I’ll assume it will be a decent movie player in the near future, like OnDemand). As long as I’m paying for a hi-def DVR, I will most certainly not be buying episodes of TV shows (or anything else) from iTunes.
  • Other/Generic media PC’s. HP, Dell and others make media PC’s that are intended to work with your television. They’re just regular PC’s running Windows XP Media Center Edition (or whatever equivalent Vista now has) with TV tuner cards and fancy remotes. Don’t bother with this if you have a hi-def set – and if you don’t, then just buy a standard-def Series 2 TiVo for $300! These machines won’t do digital signals, won’t do hi-def, won’t do OnDemand VOD – all they do is time-shift (skip commercials). Yes, you can buy hi-def video cards, etc, but at that point you may as well buy the TiVo Series 3 (hi-def).

The Content Services

Content is further behind on its evolutionary path compared to the hardware, which is scary because the hardware is still so archaic. Most of us are still paying through the nose for digital cable from one of the large US operators. Here are the alternatives so far:

  • A newly launched start-up, from the makers of Kazaa and Skype, called Joost is the most promising and most likely player to carry content that people actually want to watch over a network that isn’t a major cable operator. They’ve struck deals with many of the large studios and networks in the US to legally play great prime-time TV shows through their player. They boast a lot more interactivity and additional content but that stuff doesn’t really matter in this context – it’s still people watching stuff on their computer screen which we all know Americans aren’t going to adapt to when it comes time to relax after a long day of work and watch your favorite shows.
  • YouTube and the countless other video sharing sites command millions of hours of video and many more millions of viewers. Great for when you’re bored at work or want to watch the latest viral short film of an alcoholic toddler threatening Will Ferrel. Not only will people not sit through 30 minute prime-time shows on here, it would be illegal for most of the shows to even exist on YouTube. An interesting twist here is that Apple recently announced that the next update for the Apple TV will allow viewing of YouTube video clips. I imagine this will still be a cumbersome “iTunes-first” process, but an exciting step in the right direction nonetheless.

How We’ll Likely Be Watching TV … Soon

The Register is reporting some interesting news that Joost is in talks with DVR manufacturers to get its software embedded on their Internet-connect set-top boxes. Joost, armed with their network and studio distribution deals, would be the first to provide widely-desired television programming to set-top boxes strictly via the Internet. Apple and TiVo are in position to compete here as well and I hope, for the sake of us consumers, they do. Apple seems to be good at striking deals with content owners and TiVo has the leading hardware platform and decent in-home market share already.

In the hopefully not-so-distant future, The Ultimate Box will let the viewer watch hi-def, prime-time TV shows, rent movies in hi-def, time-shift programs (DVR functionality), watch any video clip on the Internet that has a discernible URL, view photos, videos and music from the user’s own collection, and share this content with friends via the Internet from the set-top box itself.

Economics, from the Networks’ and Advertisers’ Perspective

All of these delicious features are going to have to mix well with the economics of the television industry in order to get the content owners to play ball. NYT has a good numbers article this week that also highlights how the networks are evolving their pricing models. The highlights:

  • Networks now including online exposure in their upfront pricing because advertisers are reluctant to try it on their own.
  • DVR playback data now taken into account as well as audience size for the ads as opposed to the program.
    • The networks want credit for when shows are played more times after the original airing, thus amplifying the number of times the advertisers’ commercials may have been viewed.
    • The advertisers wanted their audience numbers based on how many viewers are watching theor commercials not the program.
    • DVR’s can and do now provide that data to Nielson.
  • Some networks have fully sold their online inventory and some advertisers have unspent broadcast ad dollars for 2007-08 season.
  • Total upfront ad sales (about 75% of all prime-time commercial spots for the season) for all 5 major broadcasters (ABC, CBS, CW, Fox, NBC) was estimated in 2006-07 to be $9.1 billion.
  • The cable networks combine to command about $6.4 billion in advertising spend, making the entire television advertising market about $18.5 billion with the new medium elements worked into the pricing.

It’s smart for the content owners to work the ads into the online versions and then charge advertisers for that exposure and I’m pleased that the commercial-skipping DVR users haven’t soured the advertising business for the networks so much that they’re suing hardware manufacturers to get the feature disabled. It could happen – but it looks like it won’t have to.

→ 2 Comments

Posted in Financial, Internet Business, Television

When China Isn't Risky Enough: Investing In Colombia

Posted on June 13, 2007 | 1 Comment

BusinessWeek reporter Roben Farzad recently traveled to Columbia to determine whether or not the “third tier” (globally speaking) economy there was ready for mainstream foreign direct investment and an “equity culture”. From an investment perspective, Columbia is the next frontier after the BRIC countries (Brazil, Russia, India, China). Its stock market has increased 14-fold since 2001 with a still modest total capitalization of $59 billion.

The one-time murder capital of the world and former home to infamous drug cartel Pablo Escobar, Medellín (pop 2.4mm) is reemerging as the commercial hub of the nation. The president, Alvaro Uribe, unlike most South American leftist leaders, sits right of center and has an approval rating above 60% in his now second term in office. His government is very much interested in attracting growth through foreign investment and understands that this can only be achieved by driving the paramilitary drug lords out of the urban commercial centers, which he’s made good progress at so far.

The U.S. has incentive to stay on good terms with and help Colombia grow as relations with Venezuela and Equador continue to deteriorate. The U.S. has sent $5 billion in aid since 2000 – the 4th largest financial aid recipient of the U.S.

The Colombian stock exchange, called Bolsa de Valores, is merely 12 people sitting in front of trading screen in an office building in Bogotá’s financial district. The exchange closes at 1PM because all business that needs to be transacted for the day is typically done by then. With such a limited number of buyers and sellers in their emerging market, volatility is the norm. In 2005 the Bolsa was up 128% (second best in the world that year). It took a 45% dip last year when many emerging markets were hit – second worst loss in the world. It is down 5% in 2007. Bolsa-listed stocks can only be bought with pesos and there are no Colombian mutual funds available to foreign investors.

Some upcoming public offerings on the Bolsa include Procafecol, a local coffee producer (Juan Valdez), and $4 billion state oil company Ecopetrol, which will likely get listed on the NYX. The only Colombian stock currently listed on the NYX is Bancolombia, whose shares are up 20-fold in the last 5 years.

U.S. investment banks have been buying up companies in Colombia and Colombian companies are slowly starting to export their products to the U.S. to grow faster. The two countries are on the verge of a free-trade agreement, something president Uribe is pushing hard for.

Although murders and other violence is dropping, infrastructure in Colombia continues to degrade and is in need of billions in investment. Many investors are waiting for that to happen to open the floodgates for other markets inside the country. The government is hesitant to break from its old-world traditions of owning all infrastructure, though. They are having trouble raising bond money because they can only deliver 6% returns instead of the 20% they yielded 10 years ago. Critics say there is plenty of private money waiting to fund the infrastructure projects if the government could just adopt an equity frame of mind instead.

The lengthy article has some great descriptions of his personal interactions in Colombia and some more detail on its violent history and how much better it is now. Extreme Investing: Inside Colombia

→ 1 Comment

Posted in Financial, Investing