azeem.azhar

After a fascinating Seedsummit, this weekend brought the other extreme of start-up investing: Spinvox’s alleged fire sale to Nuance for £92m.

Some people have been asking how £92m could be seen as a fire sale? And how come, according to the Sunday Times, Christina Domecq will end up with nothing?

The answer is simple: Spinvox had raised between £120 and £150m in capital, most recently in a series of very tough bridging loans. These totalled some £73m in various loan instruments to Tilsbury, according to the Register.

Most of these loans would have attracted high interest rates, as Spinvox would neither have had the assets for collateral or cashflow to service loan payments. (Spinvox’s revenus next year were forecast at £7m, according to The Times.)

Loans are senior to equity, meaning that on a disposable of the company bondholders receive their money in full before equity holders see any. £92m does not go very far when Spinvox was holding as much debt as it did.

Is this an achievement? You be the judge. Turning £150m of investors capital into £92m is an achievement in some (very rare) circumstances.

As to the executives, well they rightly would have held the lowest class of shares-to be paid out after everyone who has actually taken financial risk (i.e. put real pounds and pence on the line) has been paid out.

There are a two lessons here for many of the parties involved:

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Popularity: 48% [?]

So, James Harding has announced the Times will start to charge with a daily pass.

I agree: I just don’t see people paying for the kind of news which makes it into the British newspapers, at least not under this model. I can imagine–under the Allbriton model–people paying to send a journalist to a war torn area but the idea that I’ll pay for standard news is idiotic.

My sense is that Harding has got this the wrong way round–although a lot depends on the pricing points. If a day pass is significantly below the cost of the print edition (say 40 – 50p) I may well find myself grudgingly paying for it, in order to get to a recommended columnist or sports writer. If a day pass is close the print paper and the columnist is really good, I may buy the paper. (But let’s face it, I only buy the paper when I am stuck at a train station).

I might pay for access to expertise and authority though. You can charge for scarcity. So if Bill Emmott or Anatole Kaletsky is writing a column and said person is thoughtful and a veritable expert, I may well pay for it. (I buy their books after all). The Times did suggest they would keep columnists behind a paywall.

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Popularity: 25% [?]

The Kindle finally arrived. Message: a great first try but needs rapid iteration.

Unboxing

• I am used to Apple products. Found the Kindle’s box cheap and the unboxing process far from that of any Apple product. However, far better than the typical piece of consumer electronics (e.g. Blackberry)

Physical feel

• Feels futuristic. It is really light. But is feels solid. Very clever
• However, key pushes feel really tacky. I have to push harder than I would like. I don’t get the solid feedback of a genuine keyboard, nor the instance, velvet response of a touchscreen.
• The keys (especially next page, previous page) need quite a push and are joined by a horrid cheap clicking sound.
• The ‘full keyboard’ on the Amazon Kindle is fiddly.

Reading

• The device is light so holding it is a easy.
• However, the contrast ratio on the E-ink screen is really really poor. It is like reading an old, old book with battered pages.
• To move to a new page, you need to click (quite hard), get that tacky clicking sound, and then the screen flashes (I assume to reset the eink). That hold process is f-ugly. Distracting and unpleasurable.
• The screen options available do not suit my style of electronic reading. I am a very fast reader and when I read only I like to have well-spaced lines with a few words on each line and scan extremely quickly. (Sort of modified rapid serial visual presentation). I also don’t like the limited choice of fonts, vastly preferring modern sans serif.

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Popularity: 32% [?]

Thanks to a great conversation with Umair and Ditlev this afternoon, and a dogmatic column by Libby Purves which–if I boil it down–stated: ‘Good stuff needs to be paid for. Don’t pay for something then it can’t be good’ , I thought I’d offer one take on the newspaper industries options

It is possible for people who want to create useful or valuable content to do it for ‘free’ : that is free at the point of delivery. Great creative-common’s licensed photographs on Flickr are put up their by people who are happy not to be paid in cash for those particular activities.

A bike by Lulazzo

I don’t care what their motivation is (marketing, a hobby, a desire to humiliate somone) but the fact is that they do. Wikipedia is valuable–and is free in most contexts. My blog happens to be free. And in it you’ll find some commentary you won’t see elsewhere: http://azeemazhar.com/?p=317 and http://azeemazhar.com/?p=304 (both read in excess of 1,700 times).

Neither is the issue that people won’t pay for access to valuable intellectual property or content. They obviously will. People pay $1500 a year for Gregor’s oil analysis. They happily pay 2 and 20 to a hedge fund manager. (And even if they should pay less, we generally accept that premise that we should pay for measurable performance.)

(And before I am accused of being a free content zealot, note that I pay for more ‘content’ than the average person–last year: FT, Guardian, The Economist, The Week,  dozens of magazines and books; and over $1,000 on various investor content services).

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Popularity: 42% [?]

Tweetmeme, Nick Halstead’s Twitter  pulse-o-meter, seems to be the most popular UK-originated website in the US, according to Compete.com

His six-man firm has overtaken the BBC and The Guardian (as well as Web 2.0 superstars bebo and Wayn) to hit quite extra-ordinary reach numbers in the US.

In fact, Tweetmeme is now the 87th most popular website in the US, ahead of wsj.com and closing in on heavy-hitters like Linked In.

(For those who can’t read the above data, in July 2009, Compete measured the monthly reach of Tweetmeme at 11.9m visitors; the BBC at 8.4m visitors.)

Fantastic to see the potential for a great local success in a core ‘Internet infrastructure’ play. Well done Nick.

[update] Another positive datapoint for tweetmeme is that it’s daily attention is growing relative to Digg and Reddit, the other main meme-aggregators.

[update 2] As several twitters have pointed out , the bulk of these visits may be from the distribution of the Tweetmeme button and not visits to the www.tweetmeme.com website. But that, fundamentally, isn’t the point. Nick’s business (like so many internet businesses) depends on reach x monetisation of that reach.

Nick has found/chosen a distributed strategy that gets him massive reach at extremely low cost. Seems like a good strategy to follow, since he doesn’t control several TV and radio stations which he can use to push his website. In fact, he seems to have persuaded more than 7,000 sites to embed the tweetmeme buttons (bearing in mind that *.wordpress.com and *.blogger.com count as 1 site each).

By page views, the Compete counts the BBC at 250m per month, Tweetmeme at 112m per month, and the Graun and Telegraph at 25m or so per month. At current rate of growth Tweetmeme will hit 300m page impressions per month in August.

And as @yiannopolous has pointed out, Tweetmeme is growing faster than twitter. Given the heavy usage of Twitter by clients, there is a good chance that the total reach of Tweetmeme will exceed that of Twitter as measured by Compete in August. (Says more about Compete’s methodology than anything else.)

From the perspective of Internet entrepreneurs in the UK, it is an awesome result. Tweetmeme has a chance to become part of the fabric of the Internet, the way that Wikipedia or Urchin or Oingo or Amazon are now part of the fabric of the Internet. Fabric in the sense that they are the defacto way of doing something. The last time a British project did this was the IMDB, which was acquired buy Amazon in 1998. The IMDB is now the movie-information layer in the Internet stack. The time before that was when a chap called Berners-Lee overlayed HTTP on the TCP/IP stack.

Popularity: 53% [?]

Google has changed the layout of it’s famously parsimonious and user-friendly results page, pushing adverts front and centre.

This marks the end of putting the user front and centre of the Google experience, in favour of a layout that drives adverts to dominate the search results page. It isn’t as bad as Ask yet, but it certainly is much worse, much worse than it was yesterday.

This in my view represents a turning point, away from the land grab (hunting) phase of Google’s core search offering towards the farming phase.

Google is full of smart people (lots of them), so this decision is not accidental but has come after months of testing and modelling. In the old days, we might have assumed a change on the core search was for improved usability. But this change pushes ads front and centre, so the rationale must be to increase ad-clicks per search. Not a user-driven feature but a monetisation feature.

Now, why would Google, after years of eschewing ads in the face advertising, make this change? Well because they have understood that the growth is tailing off. They have reached a point of saturation–there isn’t anything more to offer from the Google core offering–so now is the time to harvest the eyeballs. Read the rest of this entry »

Popularity: 45% [?]

VC’s are bizarrely private about the returns of their funds, eschewing the calls of other asset managers for transparency–so hoi polloi (you and me) need to rely on whatever sources we can have.

Fortunately, our friends at CalPERS do believe in disclosure and twice a year publish the performance of funds in their alternative asset class. This includes the California Emerging Ventures Program. This is one of the few public sources of the performance of a wide basket of VC funds and as of August 6th, it’s data was updated to reflect performance to 31/12/2008.

I think it’s valuable for entrepreneurs and angels to get a flavour for how VC performs as an asset class over time; and the variety of performance tracks a given fund can take. These will reflect on the GPs you are dealing with and might explain their behaviour during a negotiation or board activity.

What does the CEV programme tell us?

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Popularity: 78% [?]

So my Sunday newspaper, The Observer, is rumoured to be under a strategic review. And we all know what that means for a loss-making

newspaper in 2009.

Let’s play a thought experiment and assume that, GMG’s denials aside, the Sunday Times is right and:

The Observer is thought to have lost £10m- £20m a year in recent years, and not to have made a profit since it was bought by The Guardian in 1993 …. [and]

Members of the Scott Trust, the charitable foundation that owns GMG, discussed the plan on July 6. They were shown trial copies of an Observer-branded news magazine that would replace the paper and be published on a Thursday.

How might you go about saving the Observer?

Guardian News and Media made a loss of £30m to March 2009. Revenues were £254m. It would be generous to assume that about 20% of revenues were from The Observer (or about £50m).

Let’s assume that half of £30m  accountable to the Observer, being a low circulation Sunday. This loss of £15m translates to an annual loss (or subsidy) to its readers of £37.50 a year or adding nearly 80p a week to the cover price.

Let us also assume that editorial costs run to about £15m per annum. I have no real verification of those other than the Guardian and FT’s editorial budgets are rumoured to be in the £50 to £75m annual range.

Let’s also assume that

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Popularity: 39% [?]

So Bing may or may not be better than Google, whatever better means. What does better mean?

The trouble is that I love Google and I love the language and tone it uses. They have thought exceptionally hard about how it needs to sound. In the same way Apple thought exceptionally hard about every key on the iPhone. Bing looks like it has been tested to destruction by product marketers, segmenting and segmenting away.

But here are three really easy tricks to make Bing ‘beat’ Google:

1. Allow me access to my Google apps: I use GMail, Gcal and a whole lot of other G’s. Bing tries to force me to change tons of my usage paradigms by sticking a link to Hotmail and Microsoft Maps on its toolbar. The absurdity. It is a lot easier to get me to change search engines than get me to change every other part of my life. Don’t force me to swap an entire user experience when Hotmail doesn’t hold a candle to Gmail.I want to be able to click to my mail from my searchengine, and ideally from my search engine to my mail. (The latter might be harder–possible a Firefox extension or greasemonkey script).

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Popularity: 32% [?]

The Baltic Dry is as some people know is a vital index which tracks the prices being paid for dry-bulk cargo. It is a great indicator for the health of world trade.

However, trading BDI contracts was the realm of professional investors. For us mere mortal retailers, we found proxies, the most popularof which was Dryships (DRYS). Last year, as the BDI enjoyed a hideous rollercoaster as shipping rates hit upwards of $120k per day only to collapse in autumn to as low as, well nothing. DRYS has a strong historical relationship to the BDI and the stock bounced around like a yoyo, hitting as high as $114 and a low of $4 or so.

What has happened this year is that the historical relationship between DRYS and $BDI has broken down.

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Popularity: 21% [?]