Tag Archive | "public"

Analyst Brad Hintz Has A Very Sick Fantasy About Goldman Sachs

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When the Sanford Bernstein analyst closes his eyes, he pictures Lloyd and Co going out of their way to get on Carl Levin’s good side, possibly going so far as to praise his work.

“As politicians continue to criticize the firm and the public scrutiny persists, we believe that Goldman’s clients will begin to rethink their relationship with the firm and the franchise will ultimately suffer,” he wrote. “With approximately 17 percent of the ownership in the hands of current and former partners, this control group has ample motivation to make amends with politicians and the public in order to reduce the threat to its franchise.”

[Bloomberg]



Article courtesy of Dealbreaker

GE: Don’t Be Fooled By Reports We’re Paying Taxes

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General Electric Co. refuted a statement claiming the company would return a “$3.2 billion tax refund” for 2010, following criticism of its tax rates and policies. “It is a hoax,” said Anne Eisele, a GE spokeswoman. The statement, which purported to be from GE Communications, claimed the Fairfield, Connecticut-based company was responding to a “public outcry” and would “allow the public to decide how to spend” the returned money. [Bloomberg]



Article courtesy of Dealbreaker

SEC may let startups use social networks to raise money

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The Securities and Exchange Commission may adopt rules to let internet-age technologies be used in fund-raising.

The agency is considering whether to let fast-growing companies use social networks such as Facebook and Twitter to raise funding by tapping thousands of investors for small amounts of money, the Wall Street Journal reported.

The move is part of a larger review by the Securities and Exchange Commission into whether to ease decades-old constraints on how companies can issue new shares to the public. The new funding techniques, known as “crowd funding,” could usher in a new era of capital abundance for Silicon Valley’s startups.

The technique has spread from artists looking to fund their creative works to entrepreneurs trying to bootstrap companies without giving up control to venture capitalists. Typically, a company might raise $100,000 from an internet site where users could sign up to buy $100 worth of shares.

Crowd funding could be a cheap source of cash, competing with angel investors who specialize in giving seed rounds to start-ups. Since the amounts of money are small, the downside risk isn’t too bad for investors. But the trick will be in protecting the public from scammers who have no intention of following through on promises.

Crowd funding could also be appealing to larger companies that are popular with consumers. Those companies wouldn’t have to go through all of the onerous legal disclosures required under securities laws. Mary Schapiro, chairman of the SEC, said in a letter to a law maker on Wednesday that the agency has been discussing crowd funding with small businesses and state regulators. A petition allowing crowd funding up to $100,000 has been backed by 150 organizations and individuals.

In 1992, the SEC allowed small companies to issue shares valued as much as $1 million to ordinary investors without full disclosure of financial information and other legal limits. That effort was abandoned in 1999 because of fraud concerns.

[image credit: Small Business Trends]

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Article courtesy of VentureBeat » deals

SEC may let startups use social networks to raise money

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The Securities and Exchange Commission may adopt rules to let internet-age technologies be used in fund-raising.

The agency is considering whether to let fast-growing companies use social networks such as Facebook and Twitter to raise funding by tapping thousands of investors for small amounts of money, the Wall Street Journal reported.

The move is part of a larger review by the Securities and Exchange Commission into whether to ease decades-old constraints on how companies can issue new shares to the public. The new funding techniques, known as “crowd funding,” could usher in a new era of capital abundance for Silicon Valley’s startups.

The technique has spread from artists looking to fund their creative works to entrepreneurs trying to bootstrap companies without giving up control to venture capitalists. Typically, a company might raise $100,000 from an internet site where users could sign up to buy $100 worth of shares.

Crowd funding could be a cheap source of cash, competing with angel investors who specialize in giving seed rounds to start-ups. Since the amounts of money are small, the downside risk isn’t too bad for investors. But the trick will be in protecting the public from scammers who have no intention of following through on promises.

Crowd funding could also be appealing to larger companies that are popular with consumers. Those companies wouldn’t have to go through all of the onerous legal disclosures required under securities laws. Mary Schapiro, chairman of the SEC, said in a letter to a law maker on Wednesday that the agency has been discussing crowd funding with small businesses and state regulators. A petition allowing crowd funding up to $100,000 has been backed by 150 organizations and individuals.

In 1992, the SEC allowed small companies to issue shares valued as much as $1 million to ordinary investors without full disclosure of financial information and other legal limits. That effort was abandoned in 1999 because of fraud concerns.

[image credit: Small Business Trends]

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Article courtesy of VentureBeat » deals

SEC may let startups use social networks to raise money

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The Securities and Exchange Commission may adopt rules to let internet-age technologies be used in fund-raising.

The agency is considering whether to let fast-growing companies use social networks such as Facebook and Twitter to raise funding by tapping thousands of investors for small amounts of money, the Wall Street Journal reported.

The move is part of a larger review by the Securities and Exchange Commission into whether to ease decades-old constraints on how companies can issue new shares to the public. The new funding techniques, known as “crowd funding,” could usher in a new era of capital abundance for Silicon Valley’s startups.

The technique has spread from artists looking to fund their creative works to entrepreneurs trying to bootstrap companies without giving up control to venture capitalists. Typically, a company might raise $100,000 from an internet site where users could sign up to buy $100 worth of shares.

Crowd funding could be a cheap source of cash, competing with angel investors who specialize in giving seed rounds to start-ups. Since the amounts of money are small, the downside risk isn’t too bad for investors. But the trick will be in protecting the public from scammers who have no intention of following through on promises.

Crowd funding could also be appealing to larger companies that are popular with consumers. Those companies wouldn’t have to go through all of the onerous legal disclosures required under securities laws. Mary Schapiro, chairman of the SEC, said in a letter to a law maker on Wednesday that the agency has been discussing crowd funding with small businesses and state regulators. A petition allowing crowd funding up to $100,000 has been backed by 150 organizations and individuals.

In 1992, the SEC allowed small companies to issue shares valued as much as $1 million to ordinary investors without full disclosure of financial information and other legal limits. That effort was abandoned in 1999 because of fraud concerns.

[image credit: Small Business Trends]

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Article courtesy of VentureBeat » deals

SEC may let startups use social networks to raise money

Tags: , , , , , , , , , , , ,


The Securities and Exchange Commission may adopt rules to let internet-age technologies be used in fund-raising.

The agency is considering whether to let fast-growing companies use social networks such as Facebook and Twitter to raise funding by tapping thousands of investors for small amounts of money, the Wall Street Journal reported.

The move is part of a larger review by the Securities and Exchange Commission into whether to ease decades-old constraints on how companies can issue new shares to the public. The new funding techniques, known as “crowd funding,” could usher in a new era of capital abundance for Silicon Valley’s startups.

The technique has spread from artists looking to fund their creative works to entrepreneurs trying to bootstrap companies without giving up control to venture capitalists. Typically, a company might raise $100,000 from an internet site where users could sign up to buy $100 worth of shares.

Crowd funding could be a cheap source of cash, competing with angel investors who specialize in giving seed rounds to start-ups. Since the amounts of money are small, the downside risk isn’t too bad for investors. But the trick will be in protecting the public from scammers who have no intention of following through on promises.

Crowd funding could also be appealing to larger companies that are popular with consumers. Those companies wouldn’t have to go through all of the onerous legal disclosures required under securities laws. Mary Schapiro, chairman of the SEC, said in a letter to a law maker on Wednesday that the agency has been discussing crowd funding with small businesses and state regulators. A petition allowing crowd funding up to $100,000 has been backed by 150 organizations and individuals.

In 1992, the SEC allowed small companies to issue shares valued as much as $1 million to ordinary investors without full disclosure of financial information and other legal limits. That effort was abandoned in 1999 because of fraud concerns.

[image credit: Small Business Trends]

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Article courtesy of VentureBeat » deals

Is Zipcar finally going public? Car-sharing service prices shares for IPO

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Car-sharing service Zipcar has priced its initial public offering between $14 and $16 per share as it inches closer to finally going public on the NASDAQ stock market under the ticker “ZIP”, according to a recent filing with the Securities and Exchange Commission.

Zipcar is looking to sell around 6.7 million shares when it finally goes public, meaning it could raise somewhere between $93 million and $107 million excluding underwriting costs — higher than its original estimate of a $75 million IPO. Existing Zipcar shareholders are also selling around 1.7 million shares — though none of the proceeds from those sales will go to Zipcar, according to the filing.

There were some questions as to when the company would finally go public after it closed a $21 million funding round led by Meritech capital in December. That funding was designed to clean up its balance sheet and make the stock more appealing to public investors.

The service is available in most cities — cars are kept at various locations across a city in special parking spots. Users sign up for a subscription and then schedule a time and a car to pick up. They receive a card that activates the car and are free to drive it during their scheduled time.

The company has racked up some pretty hefty board members ahead of the IPO. Former AOL CEO and co-founder Steve Case joined Zipcar’s board as part of the most recent funding round. John Mahoney, CFO of office supply chain Staples, is joining the board as well. The company also added Meg Whitman, former eBay chief executive and now partner at storied venture firm Kleiner Perkins Caufield & Byers, in February.

The updated filing also indicated that Zipcar brought in $186 million in revenue in 2010, up 42 percent from $131 million in 2009. The company still lost $14 million in 2010 — compared to a loss of around $4 million in 2009. That loss comes from Zipcar’s aggressive acquisition strategy — it has bought several car-sharing services to ramp up its operations in other cities. Zipcar most recently picked up London car-sharing service Streetcar and acquired a minority stake in Spanish car-sharing service Avancar. Zipcar also acquired American rival Flexcar in 2007.

To date, the Cambridge, Mass.-based company has raised $59 million to finance its operations.

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See no IPOs, hear no IPOs, but they’re coming fast

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While we’ve seen a pickup in initial public offerings of late, most notably in Q4 2010 prior to the holiday slowdown, many people watching the market continue to expect muted IPO market prospects relative to the 1990s. Maybe that’s not such a bad thing. The last time there was anything approaching a positive consensus was early 2000, and we know how that ended.

Sarbanes Oxley? Frivolous lawsuits? There are many reasons to stay private if it’s a close decision. However, it is no longer a close call. Investor demand for growth and the resultant multiples now available are so compelling that companies young and old (by IPO standards) can no longer afford the luxury of remaining private.

See No IPOs
The IPO markets overall are highly receptive. We just don’t see it locally – as reports of IPO volume commonly exclude not only listings on overseas exchanges but also listings of foreign companies (many of them backed by US VCs) here in the US via American Depositary Receipts (ADRs). Listings by non-US companies didn’t rally much attention back when Palo Alto’s Sand Hill Road was the undisputed champion of the IPO-generation machine, but they’re a major factor now that the market’s digital and clean-tech debutantes increasingly hark from Beijing or Bangalore rather than Palo Alto. In 2010, US companies accounted for only 85 listings at home, while 45 overseas companies made their public debuts on NYSE, AMEX or NASDAQ.  The majority of IPOs, 1,177 for the year, represented international companies listing on non-US bourses.



This phenomenon is not unique to 2010 (Exhibit B). In fact, the 2000 worldwide record of 1,883 new listings was already toppled in 2007, with 2,014 IPOs globally, netting $298.8 billion. While 2010’s world total of 1,307 IPOs and $280.1 billion in proceeds is not a new peak, it is multiples of the 85 or so domestic IPOs we see reported here in Silicon Valley.


Looking only at US IPOs, the last decade has seen a drought of biblical proportions. That said, there are two good reasons to believe that the uptick in IPOs at the end of 2010 (US and international) will gain even more steam during 2011: increasing Supply and even stronger demand.

Supply: Previous droughts of even a few years were generally followed by floods of activity (Exhibit C). Moreover, a look back to 1980 reveals that 1999/2000 was not even a one-time peak of US IPO activity – it simply represented the end of a multi-year boom, where the numbers of listings each year wasn’t as notable as the nature of companies being listed. The fact that over 80% of listings were unprofitable, and those companies garnered more attention than those in the black, was the hallmark of the Internet Bubble. Profitable and not, the “supply” of list-able companies – after a decade long drought – is significantly greater today than was the case in 99/00 after eight strong years of IPOs had depleted the supply of even the most marginally list-able candidates. The US listings to date this cycle have barely made a dent, and the best (i.e. IPOs of the leaders) is yet to come.


Taking a company public prior to break-even is not uncommon; going public years prior to projected profitability, with additional follow-on financings required keeping the company afloat … that was unsustainable.

Demand: Equity investors are clamoring for growth, as the scramble to obtain shares in Facebook illustrates. In a record low interest rate environment, there is an unfulfilled demand for growth companies to absorb increasing inflows of capital allocated for such investments. If the landscape leading into 1999 and 2000 was particularly fertile for the IPO market, the catalysts for 2011 are far stronger.


Beyond macroeconomic factors, the phenomenal growth, profit margins and network effects promised by some IPOs of the late 90s are not only on the table once again, but the drivers are arguably stronger this time around. A company like Facebook represents a stronger example of financial and competitive accomplishment than even Netscape back in 1995.

Hear No IPOs
The press is littered with the unfulfilled predictions by management teams of an IPO in the near future. Whether it is wishful thinking, bad luck with market conditions or operational stumbles, such pronouncements rarely play out.

On the flip side, the companies who say they won’t go public in the near-term, or better yet, don’t say anything at all, make up the bulk of the successful listings year in and year out.

The reason we should assume the dam will break, and companies (both over-ripe and still green) will list? The valuations are becoming so compelling that remaining private will simply not be a viable option – particularly if a direct competitor taps the capital markets in the interim.

A Question of When, not If
The SEC interest in feeder funds is just one sign that these companies “should” go public and enjoy the benefits of a listing, as they’re already facing many of the related headaches and costs.

If the year 2001 was the year where we looked back and realized we had already listed anything that “could” be listed, the current supply of list-able companies presents an inverse portrait.   2011 should be the year the dam breaks – for all of the companies that “should” have listed (absent the alternative markets which have popped up to provide capital). Over the past decade, we’ve not only replenished the pool of start-ups, but some of them have been able to ripen well past the point of traditional IPO harvest, nourished by these alternative capital pools.

Foregoing a public listing means a higher cost of capital. Certainly the valuations attached to recent investments in web companies (both direct and via exchanges such as SharesPost and SecondMarket) seem attractive – and they are. But the valuations afforded by the public market are higher – or else these investors wouldn’t be making such bets. The December IPO of Chinese online video leader Youku provides a hint of the possible valuations achievable for digital leaders in the public markets. Youku’s valuation is not indicative for most IPO candidates.  That said, at least for the time being, it appears to be trading at a trailing revenue multiple a few times as high as Facebook is changing hands privately of late. In both cases, those trailing revenue multiples are irrelevant; forward estimates of earnings (accurate or otherwise) are driving valuations – but it is the public/private differential that stands out.

To take it a step further, there’s an argument to be made that these firms “must” go public in 2011 (if not a few quarters later). A decision to remain private is not made in a competitive vacuum. Failing to tap the cheapest pool of capital can be a fatal decision if a competitor does and the IPO window closes behind them.

Among the arguments to expect a continued paucity of Silicon Valley IPOs is that there just aren’t enough candidates from a bottoms-up perspective. The argument is valid if you make a few key assumptions about who could or should go public. Larger investment banks generally counsel companies to wait until they have ~$100 million in revenues to go public. By that metric, there isn’t a wave of IPOs on the horizon. However, if past is prologue, that doesn’t account for two factors that occur every major IPO cycle, and at an accelerated pace each successive boom:

  1. Silicon Valley companies can grow at rates that mean a company could have a fraction of that revenue this year but still earn so much on the bottom line, let alone top-line, looking out 1, 2 and 3 years, that they are far more attractive to investors than a slower growing $100M company. For high-growth companies, $50M of trailing revenues is a more relevant benchmark, but even that is not a hard limit.
  2. Each cycle, equities ultimately move up to trade at higher multiples (both trailing and forward) than nearly anyone expects in advance. While the exact same excesses of 1999/2000 may not happen again, we have even stronger stimulus for high multiples given the extended zero interest rate environment resulting from the Fed’s pledge to err on the side of leaving stimulus in place for some time to come.

Size Matters?
With the shrinking number of investment banking firms over the last decade, perceptions of the IPO market are colored by the lens of the few large investment banks left standing. It is true that underwriters prefer to take companies public when the deal size (revenues aside) is at least $100 million.

However, back when the IPO market in the US was far more robust, $50-75 million dollar IPOs were common. This perception that IPOs “should” be at least $100 million to matter has affected the way even third parties measure the market, as many reports on the state of the IPO market exclude listings below $100 million.

IPOs of less than $100 million rose above the 50% level in 99/00, but that wasn’t the first time.  In fact, even after accounting for inflation, the key difference between this past decade and previous decades is the extraordinary absence of these listings – the bread and butter of the IPO market up until recently.

To butcher an already ignominious expression, it’s not the size of the (revenues) boat, but the motion of the (earnings) ocean that matters. Basically, in a low rate environment, a tally of last year’s receipts matters little relative to the earnings expected this year and next, as well as the rate of increase beyond.


David Williams is founder and CEO of Williams Capital Advisors, LLC, an investment banking advisory firm serving emerging growth companies since 2002. David has advised on pre-IPO rounds and/or acted as lead IPO underwriter for a number of high growth US, Chinese and Indian Internet/Software companies including NTES, BIDU, and SIFY, among others.

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Oracle sets eyes on HP after posting strong second quarter

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Hewlett-Packard? They’re just a minor roadblock, according to Oracle CEO Larry Ellison.

After easily beating the expectations of many analysts with its most recent earnings report, Oracle is setting its sights on capturing market share and claiming HP’s spot of number two database hardware and software provider behind IBM.

Net income for Oracle jumped 28 percent to $1.87 billion in its second quarter of 2011, up from $1.46 billion in the same quarter a year earlier, according to its most recent financial statement. Oracle’s operating revenue also rose 47 percent to $8.6 billion in its most recent quarter, compared to $5.9 billion in the same quarter a year earlier.

Oracle continues to successfully fend off the public cloud  (which allows developers and companies to offload storage and heavy-duty computing to remote servers at a lower cost) said Oracle president Mark Hurd on the company’s earnings conference call. Some of its servers and accompanying software can cost upwards of $1 million. But the strategy seems to be working. Its most recent line of servers and software is able to run more than 30 million online transactions per minute, shattering the previous record of 10 million transactions per minute set by IBM.

“We expect overall that our new generation of SUN machines, Exadata, Exalogic and SPARC will enable us to win significant share in the high-end server market,” Ellison said. “That will put us in the number 2 position very soon behind IBM, then we’ll fight it out for the number 1 spot.”

Despite the popularity of the public cloud, servers and databases that are run in-house are usually faster and easier to access. A number of security concerns prevent some of the largest companies in the world — big targets for Oracle’s hardware and software products — from jumping on board the public cloud. Those are companies that can afford the massive price-tags of Oracle’s software and hardware and have the staff to install and maintain them.

HP, which is second in market share at this point because of its legacy in servers, came a distant third in speed with 4 million transactions per minute, Ellison said. Despite the presence of former HP CEO Hurd on the conference call, Ellison did not mince words when it came to HP’s servers. He said they were downright terrible when compared to Oracle’s new products and IBM’s servers and software.

“HP’s servers are slow, expensive and have little or no software, that makes them vulnerable to market share,” Ellison said. “All our new servers are engineered to run databases and middleware faster than HP and IBM.”

But even with its success with on-premise database hardware and software, Oracle isn’t going to shy away from the public cloud. It’s releasing a suite of applications called Oracle Fusion that can run on in-house hardware and public cloud servers. Ellison said he expects it to compete with Salesforce and other public cloud applications beginning next year.

“You’re just seeing the beginning of us getting share in applications,” he said.

Investors loved the news, sending Oracle’s shares up about 4 percent to $31.45 in extended trading.

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Are hybrid clouds the path to cloud-computing nirvana?

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This post is sponsored by Dell. As always, VentureBeat is adamant about maintaining editorial objectivity. Dell had no involvement in the content of this or other posts.

If you’re tackling your company’s computing needs, you’re going to have to get your head in the clouds. But which ones?

You’ve likely heard of cloud computing – shared computing resources available over the “cloud,” or the Internet. But it turns out there’s more than one way to cloud.

When most people talk about the cloud, they mean a public cloud — big server farms maintained by companies like Rackspace and Amazon.com available to and shared by a wide range of customers. They typically sell storage, bandwidth, and computing power at rates cheaper than most businesses could obtain on their own by maintaining their own computing infrastructure.

There are also cloud applications, like Salesforce.com’s customer-relationship management service, which provide both the software and the computing power needed to run it as a package deal. These, too, are a specialized form of public cloud.

The cost savings are compelling: Why own when you can rent? But cloud computing requires a shift in how programmers design and develop applications, however. That’s a burden for businesses both large and small. Add to that lingering concerns over security and availability, and it’s easy to understand why not everyone’s rushing to the public cloud.

Security concerns with the public cloud are mostly a myth, said Jason Hoffman, founder and chief technology officer of cloud-computing provider Joyent. But most major companies will probably still always have security standards that will prevent them from moving their business into the public cloud. Many businesses don’t want to ship sensitive information off to public cloud servers, especially if they’re in regulated industries. And for time-sensitive tasks like, say, computerized trading, firms may not want to give up the edge they get from running their own servers.

That doesn’t mean companies can’t embrace cloud computing. The notion that the cloud is “all or nothing” is a myth, Amazon.com CTO Werner Vogels, a big public-cloud proponent, said earlier this year.

Some businesses are beginning to set up their own cloud-like pools of computing resources, called private clouds. They use the same kind of over-the-Internet architectures as public clouds, but they’re reserved for the use of the organization and can be firewalled off from the public Internet for a higher level of security and performance.

The best-of-both-worlds mix, where businesses use private clouds for their most important computing tasks and public clouds for occasional peaks of demand or less-sensitive tasks, like serving up images on a website, is the hybrid cloud. And it could be the way forward for businesses that aren’t ready to sail all the way to the cloud.

Startups and big software companies are gearing up for the hybrid-cloud opportunity. Eucalyptus Systems, a startup which recently raised $20 million, is making tools that help businesses adapt their applications to run on hybrid clouds. Microsoft and SAP are increasingly talking about hybrid clouds, where their software is available for installation on customer-owned servers and also provided as a service over the Internet.

Odds are that the public cloud will be the infrastructure that inevitably wins out, especially as the strength of their security gets tested and proven to the satisfaction of customers and regulators. But hybrid clouds could win in the short term, as a way to get businesses started on cloud architectures. And in some ways they live up to the ultimate promise of cloud computing — that it doesn’t matter where our servers are physically located. Public cloud, private cloud, hybrid cloud — as long as it’s in the cloud, and we’re getting more efficient, we’re headed in the right direction.

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