Archive for June, 2010

Death of old media?

June 29, 2010

It was such a pity to see another big traditional news company Le Monde got in trouble and was sold. Is it another signal of death of old media business? iPad is out there but would it really revive media business to take back its old glory?

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One Dollor Man

June 25, 2010

You may recall old TV show called “6 million dollar man.” This is like a half human and half robot being that does incredible stuffs whenever there is a trouble.

But, guess what? there is one dollar man in the corporate world who is so entrepreneurial and withholds immediate personal interests for a while until he proves himself. Steve Jobs has got his fame taking very nominal salary (like $1) and also Kim Jung-Tae who led Kookmin Bank, the largest bank conglomerates in Korea out of trouble also collected zero paycheck for his incredibly challenging mission. Though, what made them to be really paid off at the end for their hard work were their stock-options or existing shares. In that case, their interests were totally aligned with other shareholders. If these entrepreneurial CEOs were really turning around the company, then they can be rewarded with roaring stock prices and they can eventually cash out.

This “one dollar man mind-set” maybe something we often expect from venture founders. Especially, when there are unproductive valuation or compensation battle between founders and institutional investors, we always hope that founders minimize or put off their expectation for immediate personal gain (like sales of founder shares or lucrative compensation package) for a while.

I saw two different cases. One of co-founders wanted to cut her paycheck at $350K while she was ok with her share position to be low. Initial funding wasn’t that great, but the board approved her package because she was a so called “high flier” who had great track-record.

The other case was that a founder already made some fortune from his previous venture. He was willing to cut a nominal salary like $1 for him to act as an entrepreneurial CEO until company hit certain milestone. It took longer than expected but he was totally fine with the fact that he was not rewarded immediately. He thought that other investors were also taking enormous risks, too. So, he thought that it was a good gesture and motivational factor for him to focus more on earliest moment of his new venture and to have a more efficient P&L until it started generating sufficient profit to create huge upside.

We definitely had more successful result from the second case. Though, in reality, we don’t see too many brave one dollar men. As investors, we also suggest more balanced approach. Though, we still try to disregard extremely personal-gain-oriented founders who have very lavish life style. We’d better working with someone who is humble and caring. As an investor, we don’t want to distress hard-working venture management team. However, we always hope that founders can really have forward-looking thoughts that they know what they are getting into and allocate resource to the most needed place.

What’s your business that makes you feel brave enough to take a short-term risk but yield huge outcome at the end of day?

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Religions on the new media platform

June 23, 2010

Thanks to kind invitation from my aunt who is working in the fashion industry, I had an opportunity to mingle with thought-provoking Christian leaders fairly recently. Like venture capitalists get heavily involved with entrepreneurs and seed new ventures, these Christian leaders are working hard to touch individual souls and planting new churches throughout the globe.

There are a number of active young churches that have grabbed many youngsters’ attention and accessed untapped demographics that traditional churches haven’t effectively reached out yet. Hillsong, Vineyard, or New Song Churches are good examples to name a few. Those ministries have hip atmosphere at their regular services. Pastors are extremely casual in their styles and their messages are simple. Music is quite contemporary. Though, these pastors are good at delivering evangelical messages to the post-modern young generation.

What I’ve been surprised and also fascinated is that those church leaders are highly literate of all these new and cool media platforms that are available in the market. They’ve been very proactive acquiring new media platforms and using them for their ministries. Members at the church regularly meet and many of them are connected with other colleagues 24×7 through these social networking platforms. Pastors often emphasizes on radical transformation in life and their messages are aligned with this purpose.

Their messages can now widely and quickly spread-out via cutting edge new media platforms. Members of church can also easily find out small supporting groups where they find more mutual friendships where they can spiritually grow. These off-line or online supporting groups can give members a chance to receive timely prayer supports and to share their lives to become better Christians.

Now, these young Christian leaders mobilize their efforts leveraging social media platforms to create more bigger spectrum of influence. Geographical limitation is not a big obstacle anymore although local presence is an extremely important piece of success of their ministries. Often, I find people who are attending existing local churches but also actively check in those young and hip churches that have huge presences on the new media platforms. It would be very interesting to continue to observe how these ministries evolve and create wider range of influence in the age of new social media.

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Let other people shout out for you

June 22, 2010

One of Apple’s great marketing strategies is to make everyone shout for Apple. Under excellent orchestration of product management, promotion, and distribution, Apple makes every media, manufacturer, mobile operator & telecom company, and most importantly audience dances and shouts out-loud for its new products. When everyone marches together, no one easily beats it. All these media and personal blogs relentlessly write about Apple-saga. It’s definitely something beyond magic.

Bill Evans of Twitter has shown up great talents to attract huge media attention early on. Google, Facebook, Linden Lab also has done it. To say few words on Twitter, 140 character micro-blog is something that everyone can think of. Though, it’s a different story when Bill and his team define each step of Twittering very seamlessly adapting to our lives (as simple as email or sms) but very addictive. Tweet (simple but catchy few words) and Follower concepts are just fascinating. Twitter has its buzz, presence, and loyal followers.

Tangible products sales, apps, buzz, and real everyday-usage that Apple has achieved is still very rare combination, but proven to be very successful. Google now wants to move its steps faster to conquer mobile and TV space. Though, I hope Google can really move everyone’s heart so that it can receive many audiences who voluntarily shout out-loud for it.

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Emotional impact on venture valuation

June 18, 2010

It’s a brief post before wrapping up this week. It’s a World Cup week. Ever since Korea co-hosted World Cup in 2002, soccer has become a sports that brings in national attention. Last night, I saw a huge crowd near the Seoul City Hall cheering up the Korean team playing against Argentina, a strong winning candidate. Korean team unfortunately lost. This morning, it was quite interesting to see that ad sponsors that leveraged the World Cup effect on their commercial campaign also lost. Their stock values went down quite a bit. It’s one of good examples of emotional impact. It could have not happened if Korea won last night.

Venture valuation often creates controversy. If products are much ahead of the market curve, it’s hard to find a right pricing point for the products. Financial modeling often contains too many ‘if’s’ and it does not give a bullet proof base for a newly-created startup company’s valuation. Technology itself won’t just simply justify venture’s roaring valuation until products or services become more visible. At any rate, early stage venture valuation is still widely driven by founding members’ entrepreneurial contribution, level of capital supply, and emotional expectation.

Entrepreneurial contribution is something you hardly capture as tangible asset base for a new venture. Though, experience, expertise, network, and intellectual properties that entrepreneurial management team brings in is something that venture capitalists always wrestle with to find a right middle point of their own and entrepreneurs’ contribution and risk-reward levels.

Availability of capital in the market often drives venture valuation, too. Supply and demand applies to almost every venture valuation these days when we try to find price equilibrium or capital injection point. No one wants to take a hassle buying at over-priced ticket value too early. Though, if there is competition from capital participants, valuation often surpasses everyone’s justification level. This rule works same if there are limited supplies of capital, but there are too many similar venture businesses. If there are too many to shop, then, price point significantly declines or sometime companies can’t raise sufficient level of funding to build a business. This supply and demand rules works all the way to the public market. Many times, venture backed IPO in Korea is not received too well. I suspect that is mainly because Korea has relatively smaller capital market but there is a quite number of companies seeking attention from investors.

Emotional impact is probably something we won’t or don’t want to agree. Though, blind expectation for a new technology XXX had a previous case that created over billion dollor expectation for a young startup company that only had 2-3 years of history. Early champion in the market can command rightful price point for its own product selling and also its corporate valuation can fly high as long as the company keeps its status as “one-and-only” in the market. However, when competition starts sizzling and lots of me-too businesses run into the market, its margin ratio won’t guarantee high level of profitability too long. As an example, if luxury fashion business can hold its original designer label goods from imitation market for a week, it can sustain and enjoy current level of glory. Otherwise, it will fail. Often times, those black market shops bring out new season’s line-up on their windows before original designer hits the door of its retails.

As a venture investor, it’s great to gain knowledge ‘how not to lose’ in emotional expectation when you invest and also ‘how to win’ this emotional play when you harvest. Ultimately, you want to invest and grow “one and only” business that will sustain its high level of glory for long-time. At the same time, you hope to avoid any sort of unnecessary competition (I.e. either investment-wise or business-wise) to stay sane when you chip in.

Anyhow, where can I find this highly profitable but widely untapped business opportunity?

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