Wednesday, October 22, 2008

Tech startups make cuts amid downturn

By Therese Poletti

SAN FRANCISCO (MarketWatch) - Many Internet startups are starting to heed the dire warnings of their venture capital investors, and last week, some began cutting costs in order to survive the economic downturn, including laying off employees.

Two weeks ago, Sequoia Capital, Benchmark Capital, angel investor Ron Conway and other investors wrote some scary memos to their portfolio companies, warning them to conserve their cash, cut costs and start generating revenues. See full story.
So many companies, some of them backed by the above-mentioned firms, started making cuts. Companies ranging from online real estate appraiser in Seattle to Internet radio station Pandora of Oakland, Calif. to San Francisco-based ad network AdBrite all began to issue pink slips to employees last week.
Even the elder statesmen of the Internet are swinging the axe. Online auction giant eBay Inc. (EBAY:
ebay inc com
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Sponsored by:
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announced plans to fire about 1,000 of its workers earlier this month. Yahoo Inc. (YHOO:
Yahoo! Inc
Last: 12.37+0.30+2.49%
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Sponsored by:
12.37, +0.30, +2.5%)
may announce cuts of 1,000 employees on Tuesday, according to recent reports in the Wall Street Journal and ValleyWag, a widely read Silicon Valley-based blog.
One thing seems to be clear. As the companies who already have funding scramble to stay alive, and take up even more attention of their investors, my guess is it's going to be harder to start new technology companies, especially in the Internet sector and in capital intensive arenas such as semiconductors and telecommunications, over the next year or longer.
New data released this weekend from the National Venture Capital Association gave a glimpse into a trend that will probably continue as the economy worsens. The companies at the earliest stages in funding saw a slight drop in investing amid an overall 7% drop in venture funding, which will be exacerbated by the credit crisis. The Internet sector was a big loser of investment, with funding of Internet startups falling 36% from the second quarter.
Over the last year, venture capitalists have been faced with a very big problem: the lack of a public market for their companies. As the VCs noted on a conference call to discuss the data, there has not been a single initial public offering since March.
Venture capitalists are already spending more time with the companies in their portfolios that already should be going public. They have been holding their hands, trying to find buyers, or helping in the search for strategic partners for companies that, in another time, might already be publicly traded.
John Taylor, vice president of research at the NVCA, gave a great analogy to help understand a problem that I think is only going to get worse.
"Imagine the example of a high school that has lost its diploma-printing machine," he said. "You have all these high school seniors and it can't release them because there is no place for them to go."
If these numbers continue to build, the venture firms will start paying less attention to the very early stage companies. As their focus becomes how to get returns on their increasing investments, newer younger companies will get less attention.
With the credit markets tightening, the exit strategy via an acquisition is also getting harder. Often, companies need financing for such deals.
Other sources of capital are drying up. Angel investors are seeing their own personal portfolios take a hit, and therefore have less to work with. Attempts at bootstrapping will be harder for entrepreneurs because they will not be able to use their homes as piggy banks, and friend and family financing will be harder to come by as the credit crisis hits consumers' own pocketbooks by limiting credit cards with large balances.
The irony was not lost on anyone in Silicon Valley that AdBrite, one of the companies to cut the most jobs last week (40%) counts among its founders Philip Kaplan, the creator of one of the more infamous sites of the dot-com bust. The site - - chronicled the demises of the Internet bubble through snippets and rumors about companies in trouble.
Last week's moves were followed with a bit of glee among the media (myself included) and the VCs themselves, almost with the same kind of excitement and morbid fascination that comes before a big storm. The VCs hope to be able to use the desperation that may creep into some companies as a chance to get bigger stakes for lower valuations. And the media wants to say "we told you so." See full story.
At least one blogger has started a lame attempt to recreate, with a blog called
"There are some pundits out there who make a living out of creating controversy or a buzz out of uncertainty," said Myles Weissleder, founder of SF New Tech, an entrepreneurial group and a co-founder of, which helps computer users control their identities online. He said the vibe at the group's most recent gathering earlier this month was "energized."
It will be interesting to see how far entrepreneurs will be able to get in the current economy, and perhaps, it will be a true test of their ideas. Those who don't start a company with the sole intent of getting rich quickly -- an endemic problem in both the first and the Web 2.0 bubble -- will have more patience and conviction in their ideas than others. Others focusing on the more urgent field of clean tech may fare even better.
But it is still going to be tough, especially if the venture capitalists are still babysitting the high school graduates.

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Gas exporters' group to be formed

Gas storage
Plans for a gas equivalent to OPEC are unpopular in the west.

Russia, Iran and Qatar have taken the first tentative steps towards the creation of an organisation of gas exporting countries.

The three countries have agreed to form "a higher technical committee" that could lead to a gas equivalent of Opec.

"We can say that today witnessed the birth of a major gas troika," said Alexei Miller, chief executive of Russian oil giant Gazprom.

He said other countries would be encouraged to join the consortium.

Technical committee

At a meeting in Tehran, Iran's oil minister Gholamhossein Nozari, Qatar's energy minister Abdullah al-Attiyah and Mr Miller agreed to establish a high-level natural gas committee.

The committee will meet for the first time in Doha in the next few days.

Mr Nozari said: "Our three countries have reached a consensus on forming a common gas organisation... on accelerating its implementation and on preparing its statutes."

A formal announcement on the establishment of the organisation has not been made. Mr al-Attiya said: "The next meeting in Russia will witness the birth of this organisation."

Western fears

Russia, Iran and Qatar hold the largest reserves of natural gas in the world.

Fears over energy security and the price of natural gas mean a formal organisation of gas exporting countries would be deeply unpopular in Europe and the US. Such an organisation could hold a monopoly on world supply and could set prices to suit its own needs.

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Man Finds Racial Slur Printed On Receipt

A Kansas City man found a racial slur printed on his receipt after returning a pair of shoes he bought over the weekend.KMBC's Marcus Moore reported that Keith Slater, 22, bought a pair of shoes from a store called Journeys. Slater later returned them after finding a cheaper pair at another store. Slater did get his money back, but it was what was printed on the receipt that he and his family found disturbing."That makes me upset. I don't want to look at that (receipt,) that makes me so upset. Why would you say that?" said a woman who was shown the receipt.
"Have they been fired? I mean, this is absolutely crazy," said a man who saw the store ticket.The receipt, which shows "Cust: Dumb" and then the n-word, is what Slater received after returning a pair of shoes to Journeys at Oak Park Mall."When he showed me that receipt, I could not believe it," said Slater's mother, Linda. "He couldn't believe it. I couldn't believe it. None of us got any sleep just thinking about it."By the time the Slaters noticed the racial slur printed on the receipt, the store was already closed for the day.Hoping to get answers about how the words got on the receipt, the Slaters returned to the store the next day. But they said they never got a full explanation, only that the employee entered a generic code."And it pulled up six or seven different choices, and the choice that she (the employee) chose was the very last choice," said Slater's father, Keith."I really don't doubt that this is the first time it happened. I'm sure it's happened before, but this is probably the first time that somebody noticed their receipt and came back and asked about it," Linda Slater said.The Slaters said they are waiting for answers."To me, the appropriate thing to do is to terminate the employee because it's just inappropriate for that to be there, and then to have that deleted from their system," Keith Slater said.The Slaters also filed a complaint with mall security.A representative with the U.S. Department of Justice told KMBC that it will refer the case to the FBI to investigate whether a civil rights violation has occurred.

Store Owner Issues Statement

On Tuesday, Genesco, which owns Journeys, released this statement:"While we are continuing to investigate this incident, it now appears that an employee in one of our stores entered highly inappropriate statements in a form used to process a merchandise return. Needless to say, such an act was not authorized by Journeys, and will not be tolerated. This employee has been terminated."At Journeys, we pride ourselves on valuing and respecting every customer. We are shocked and sickened that a former associate could be responsible for an act so out of keeping with our culture and our values. We profoundly regret this incident."

Community Activist Boycotts Store

On Wednesday, community activist Alonzo Washington held a news conference to announce that he and his family will no longer shop at Journeys, and they are asking others to do the same.Washington said his family is returning several shirts that were purchased at Journeys a few days before the Slater incident.Washington said the store's apology to Slater was not enough.Washington's wife, Dana Washington, said she is concerned about a culture of race problems."My kids are looking at this wondering why would a person do something like this. It's unfortunate that African-Americans still have to go through these experiences today, because unfortunately, not everyone has arrived at the point where we should treat each other fairly," Dana Washington said.

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Atheist buses ready to roll across country after making £31,000 in a day

By Martin Beckford, Religious Affairs Correspondent

Even religious groups donated money to the cause in the belief that the campaign, highlighted in The Daily Telegraph, would encourage people to think more about faith and could actually enhance support for Christianity.

Organisers needed to raise just £2,750 from supporters in order to pay for adverts doubting the existence of God to be plastered across 30 London bendy-buses for a month, after the prominent atheist Professor Richard Dawkins agreed to match all donations. Previous attempts to raise the money had failed.

But the £5,500 target was met within minutes of a page being launched on the fundraising website Justgiving on Tuesday, and after a few hours more than £31,000 had been given to the Atheist Bus Campaign – over five times the amount required.

Now there are plans to get the message – "There's probably no God. Now stop worrying and enjoy your life" – put on buses across Britain as well as on Tube trains in the capital.

The campaign was launched after Ariane Sherine, a comedy writer, called for a "reassuring counter-advert" to religious posters on public transport that atheists believe "threaten passengers with eternal damnation".

She said: "This is absolutely brilliant and I'd like to thank everyone who donated for their support. The sky's the limit for atheists even if we don't believe there's anyone up there."

Hanne Stinson, chief executive of the British Humanist Association, which is handling the donations, added: "If the money keeps pouring in we can expand the campaign, not just to ads inside the buses as well as outside, but to ads on the Tube or other transport, and in locations outside London."

One of the more unlikely donors was the religious think tank Theos, which was set up two years ago with the support of the Archbishop of Canterbury, Dr Rowan Williams, and the head of the Roman Catholic Church in England and Wales, Cardinal Cormac Murphy-O'Connor.

Theos gave £50 to the cause as it believes the "weak" adverts will encourage people to think about God.

Its director, Paul Woolley, said: "Initially, we almost felt sorry for the campaign, as its difficulties showed that there were not many atheists in Britain, and certainly not many who were willing to put their hands into their pockets. But when we saw the message, we couldn't believe it.

"Stunts like this demonstrate how militant atheists are often great adverts for Christianity."

The Rev Jenny Ellis, spirituality and discipleship officer of the British Methodist Church, added: "This campaign will be a good thing if it gets people to engage with the deepest questions of life."

Advertising company CBS Outdoor is set to put first run of the posters on a fleet of 30 bendy-buses that travel through the central London borough of Westminster in January, although the exact routes have not yet been decided.

Tim Bleakley, the firm's managing director for sales and marketing, said: "It's not for us to make judgments on the appropriate nature of advertising based on people's beliefs, but we are pleased to see people engaging and reacting to outdoor advertising.

"Ultimately, CBS Outdoor is a commercial media business that generates revenue from advertisers, and we are completely neutral in every respect. As such, our decision to take an ad that promotes God, or one that promotes No God, is based on commercial terms, as long as the advertising copy itself does not breach UK advertising standards."

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