Tuesday, October 30, 2007

NY Magazine: Check your facts!

Tonight, like most Monday evenings, I sat down to thumb though my weekly intake of New York Magazine.

There is always some sort of editorial piece about a quarter of the way into the issue.

This week they f*cked up in their reporting of the Web 2.0 big time. It really pisses me off to continually read all these doomsday reports about how the web is blowing up (for all the wrong reasons) and everyone is about to be screwed in the start-up market.

The web for sure is expanding at a lightning fast speed. Facebook is expanding by 250,000 new users each day! No wonder they recently received a valuation of $15B (albeit a very high valuation). But still, certain web properties are going to go for extravagant sums of cash. Everyone thought that $560M for Myspace was ridiculous, only to see Youtube purchased months later for $1.6B. These aren't old companies either. Facebook was valued by Yahoo at around $1B only a year ago, but Zuckerberg knew better. He knew his company was worth more and held out, because he could.

Reading the misquoting of Howard Lindzon (whom I work with through Biltmore Ventures) and Fred Wilson, whom we have done deals with (Wallstrip, AdaptiveBlue) provides me with a reality check. John Heilmann presents the New York tech scene as a sad backwater for start-up companies. The debate about Silicon Alley versus Silcon Valley has always been playful in certain aspects. However, we do not need a New York based report debasing a burgeoning moment in our tech history.

Heilemann failed to take note of Doublclick's recent buyout by Google for $3.1B. Did he fail to notice that they are headquartered out of New York? Its not just Palo Alto and Menlo Park that have multi billion dollar companies. Isn't a little company called Microsoft headquartered in ... Washington State, oh and lest we forget Big Blue our friendly upstate New York counterpart. Where were Google and Yahoo when IBM started?

More money may be pouring into the Valley, but that is not stopping the Valley from coming to the Big Apple. Google has approximately 560,000 feet of office space in NYC. At our rental rates that is a major investment, even for a company of their dearth.

Next time (and I expect more misinformed reporting soon) someone decides to deride the efforts of all the start-up companies, the entrepreneurs and investors who strive each day to make the New York tech scene vibrant and meaningful, I hope they call Scott Heiferman or participate in an online discussion on NextNY before they call a our existence inconsequential or dead.


Wayne Mulligan said...

Great post! Couldn't agree more - nuff said.

Kristian said...

Perhaps I am naive at the young age of 24 to feel as though I "know" everything, but this article was too outlandish for me to NOT say anything.

dan said...

Great post, I thought a lot of the same things. I also thought his arguments for a bubble were extremely weak, especially this segment:
"There’s the frothy run-up in the nasdaq, which has lofted Amazon’s stock back to its all-time high, has inflated Yahoo by almost 30 percent this year, and is rapidly propelling GOOG toward $700"

Yhoo was beaten down last year, and simply has readjusted over the last 6 months in a pretty good market (hence 30% gain). Amazon has had an incredible surge in their revenue and profit numbers (for the record their numbers are light years ahead of the last time they were valued at this level), and we all know that Google is a cash machine. The stock prices are all reasonable when compared to financial fundamentals. Last time it was about eyeballs, at least now there are some things to base the valuations on. And the thing I really hate is when people refer just to a per share price as frothy (as he does with Google). It has nothing to do with it. Berkshire Hathaway trades at $132,000 a share, are they proof of the bubble too?