Benjamin Kuo’s Blog

Welcome to the newest sponsor of socalTECH, Orix Venture Finance!

ORIX Venture Finance provides senior debt and equity side-by-side investments to mid- and late-stage companies with revenue run rates of $10MM or greater. For more info on the firm, go to their web site, or (even better) call Brian Weber at 949-798-6169.

Orix joins the growing list of sponsors who are helping to make our coverage of Southern California technology industry possible. Those sponsors include:

Binary Pulse Technology Marketing (www.binarypulse.com)

CBRE Richard Ellis (via Richard Abbitt) (www.cbre.com/richard.abbitt)

Clearstone Ventures (www.clearstone.com)

Costello and Sons Insurance (www.costelloandsons.com)

GetItStarted (www.getitstarted.com)

PricewaterhouseCoopers (www.pwcglobal.com)

Redpoint Ventures (www.redpoint.com)

Rustic Canyon Partners (www.rusticcanyon.com)

Safire Partners (www.safirepartners.com)

SVB Silicon Valley Bank(www.svb.com)

Stradling Yocca Carlson & Rauth (www.sycr.com)

Stubbs Alderton & Markiles LLP (www.biztechlaw.com)

It’s the first real work day of September, the traditional re-opening of the venture capital funding season. VC fundings — which typically tail off in August due to the vacations of many a managing director — usually start kicking back into gear this month. CEOs are dusting off those term sheets, warming up their iPhones, and sending off emails as I type this, when (finally!) all those venture capitalists they have been trying to get in a room are finally back from their long sunny days in Europe or at the beach.

The question is, will VCs be as open with their investments going into this season as they were last year? I’ve been speaking with both venture firms and angel investors, and I’ve heard muttering about lack of quality deals; concern about the economy; worries about lots of “me too” Web 2.0 investments; not to mention lots of time being spent on later round companies, along with a closed IPO window. It seems like this might have shown up in the numbers: our tracking shows that there was a steep dropoff in announced venture deals in August of this year (10 deals, versus 33 deals for August of 2007). On the other hand, I see investors who are very happy to have found some great technology and/or Internet deals and companies they are about to fund, lots of experienced (second-time-around) executives now at new startups, and CEOs who are saying it’s been much easier in recent months to find investors interested in their companies.

It’s tough to call, however whatever the result, it will be interesting to see if we continue to see a lackluster number of venture deals like we did in August, or if September will see a new surge in closed fundings.

Okay, it’s 10:30pm on Sunday of the slowest news week of the year, and the day before Labor Day (so I expect–and hope–you’re off enjoying your weekend instead of reading a blog post). But, saw this great post by Marshall Kilpatrick explaining the why’s and how’s of embargoes (succinct, accurate, and well thought out) so I thought I’d pass it on. For you to read Tuesday morning.

I’d add a few more tips:

Don’t ask us to embargo, but give an exclusive to someone else for early release.

If you’re going to release info early to anyone else — be it the mainstream press, a blogger, etc. — don’t ask any publication to hold to an embargo. This is particularly prevalent in the case of the “DEMO” style conferences, which seem to insist that startups not pre-announce what they are going to show at the conferences. That’s fine, but AFTER you’ve announced what you do and shown everything at the conference, don’t expect people to hold that when there are 25 other press people at the conference writing up an article, too. We also often hear from very naive startups who think that in order to get ANY press, they have to give an exclusive to a blog. You’ll get press/attention if your startup/news is interesting, NOT if you promise secret favors to bloggers.

Don’t try to embargo news you’ve posted already on your web site.

This is just asinine, but you’d be amazed how often this happens.

Once an embargo is blown, it’s blown.

In this day and age of news aggregators, RSS readers, and more, if someone blows your embargo, consider it blown and just release the info. There’s such a wide distribution of info from blogs now, if the news goes out–even if it gets removed from a particular offending site–people can read it on Google News, technorati, their blog reader, various cached news feeds, etc. Face it–it’s out there.

Check with sites to see that they respect embargoes, before sending your news.

This goes in particular for sites which are well known for pre-releasing news whenever they want, or who have an outright policy of not respecting embargoes. We chuckle ever time we see this in Valleywag (for those not familiar with Valleywag, they exist to tweak the nose of Silicon Valley–and embarass folks for stuff like this all the time.) There’s a number of publications notorious for this–make sure you check with them first, and also see what kind of reputation they have. (For the record, you should contact us and ASK about what kind of news and if we’d even agree to an embargo, and for what reasons–we’ll let you know. Don’t send us something BEFORE you ask us.)

Don’t embargo run-of-the-mill, who-cares sort of news.

It’s one thing to embargo some huge news, where our writers are going to need to do some research to prep a well thought out article. It’s another thing to try to embargo something which no one cares about. Stuff that might merit an embargo: huge investment by a publicly held company/strategic partner; or a merger/acquisition. What does NOT merit an embargo: your  small, private company releasing a minor, version 10 update of an very old product; your promotion of someone internal to “Director of Business Development.”

Don’t send us an embargo news item at 2am Monday morning for release 7am Monday.

Don’t bother with embargoes if you’re not giving the publication you’re approaching adequate time on the news. The principal reason for embargoes — to help give a publication time to put some depth in reporting into your news — doesn’t work when you don’t provide them adequate time to research and write a piece. We see this quite regularly. (btw, in general, it’s bad to send emails to most writers/bloggers at 2am on Monday morning, because there’s bound to be a pileup of emails with Monday releases, not to mention whatever came in earlier on the weekend).

Once upon a time, the life cycle of a startup was thus: get funded, pull in a couple of expansion rounds, grow your business to double digit millions, and then file for an IPO and hit the market. It was an age-old routine, and even though not all companies made it, it was a pretty routine path. Funding, expand, IPO — funding, expand, IPO — or at least, funding, expand, get bought.

In what seems to be (to me, at least) a fascinating side effect of a very difficult, if not impossible IPO market, it seems that lots of companies are getting to that last stage — ripe for an IPO — and just not getting any farther. These are quality companies — healthy earnings, double digit revenues, all the hallmarks of a firm ready for an IPO — but due to the market, just can’t make it happen. The biggest visible symptom of this is the number of strange “earnings releases” we’ve been seeing from companies, which are private, touting their earnings numbers, etc. as if they were really public. It’s been happening a lot lately, where we have been running into companies who really would like to IPO, but because of the markets, can’t.

Holden Parrish, contributing editor at our sister publication in Texas, texastechpulse.com, spoke with spoke with one of those companies — Austin, Texas-based NetQOS — this week, and heard the same story. Here in Southern California, there are a number of companies who would, in normal times, be IPO candidates, but instead, have to be content with making money but still locking in their venture investors. It seems like some companies who should have gone IPO a long time ago are returning to the VC trough — i.e. San Diego’s Active Networks and a huge $80M round this weekafter already once trying to hit the IPO market — while others have turned to private equity to fund their growth, instead of the public markets (witness things like the $100M investment in 2007 for Specific Media). It’s an odd dilemma: what do you do if your company is doing very well, is successful by all measures, but there’s no exit available for investors?

South by Southwest, the music/media/technology conference held in Austin every year, is coming up in March, and a group of Los Angeles technology folks has gathered together a panel talking about the technology community in LA. The group — which was organized by Sloane Berrent of CauseCast, and also includes Andrew Warner of Mixergy/Lunch 2.0, Kurt Daradics of MOTM, Kevin Winston of Digital LA, Mike Macadaan of Twiistup — is lobbying to get their panel heard at SXSW.

The group is hoping to help other communities learn from from the Los Angeles technology community with the panel, entitled “How LA Has Built A Successful Tech Community.” Interestingly enough, SXSW uses community voting to decide which topics and panels to include in the festival, and which panels to include are based mostly (but not entirely) on how many people vote for any specific topic. The group has a lot of competition–there are over 1200 topics being proposed for SXSW, ranging from “How to Monetize Twitter,” “Mental Health for Geeks,” to “I Get Paid To Go To SXSW.” Based on the number of people attending and interested in networking within the tech industry here, I suspect they have a good chance of getting selected. The last day for voting for their panel is tomorrow.

One of our regular readers emailed me this morning, asking about what was a fairly sparse early morning email (and corresponding short list of items in our RSS feed), asking me if there was some kind of slowdown in the news, and if that was related to the economy.

It’s always tough to tell real time, however, the last two weeks of August are historically slow news weeks. It’s the tail end of summer vacation, some folks are probably already looking towards labor day for their last summer hurrah, and most companies are looking towards the upcoming fall conference schedules for major releases and announcements.

Based on email bounces alone, a good chunk of our regular email readers are off at the beach, up in the mountains, or otherwise somewhere else except sitting at their desks. It’s always like this, as far as we’ve been sending out our newsletter.

On the other hand, slow news weeks also are the hallmark of a slow economy. During the dot com bust, the volume of news items in our newsletter went from something like 10-15 major news items on big days (go-go bubble days) to maybe 3-4 items, many fairly minor. It’s just a reflection of how much economic activity there is out there. Last year, there wasn’t nearly the normal summer slowdown you see in August; but then again, there wasn’t the long parade of bad mortgage and credit news, store closings and layoffs, and overall bad economic news you have been hearing lately. Today is quieter than a typical Monday, but the key will be news volume when everyone’s back in September.

Just in case anyone was wondering, yes, posting to the blog (and our news site) is slow and will be for the rest of the week, as I’m (sort of) on vacation (though, it does appear to be a slow news week, so you might not have noticed.)

I’ve noticed something recently in comparing “reality” with what you see on the Internet via blogs, social networking web sites, etc. — which is that the true movers and shakers in Southern California are a lot more private than you might think. While lots of attention is given to those who blog regularly, promote themselves through Facebook/twitter, etc. — most of the folks who make deals happen, control the money and checkbooks, broker relationships, and otherwise would be considered the “movers and shakers” in the technology industry are not present on the Internet world. Those folks might (maybe) be on LinkedIn; are probably not on Facebook (maybe are in many cases deliberately not creating a Facebook account); don’t twitter, or even blog.

The question is: should the movers and shakers in SoCal be more public, or is private better? Is the tech-celebrity driven culture which is growing up in Silicon Valley helping get better deals, improve companies, helping companies to scale and attract customers — or is it a distraction? I don’t know the answer, but I’m intrigued that so many of the folks I believe are behind Southern California’s rise to prominence in creating technology firms are opting more for the private, rather than public exposure.

Despite what is a natural adversarial relationship between PR and journalists, I thought I’d continue on the thoughts I posted yesterday on the debate over PR. Even though journalists have a natural distrust of PR, and–from a point of responsibility to readers, have to take all information with a grain of salt– I thought it might be useful to point out where working with PR professionals can be useful — at least, to a more media-oriented and less blog-oriented publication like socalTECH. Those are:

1. Bringing professionalism to the table

Despite what journalists might say or despise about having to deal with PR professionals, I find that there’s a clear cut level of professionalism between those with (reputable) PR firms and those without. That shows up, very concretely, when you deal regularly with early stage startups with and without a PR firm or savvy marketing person. For example, I’ve run into several cases where very naive and un-savvy CEOs have done very, very, stupid things in dealing with our publications; those include a) flaming writers when they don’t agree with what they published in an article, rather than politely disagreeing and asking for correction or clarification, b) told our writers they can’t talk to us because they promised some tech blog/newspaper exclusive rights to all of their news (?!?!) c) promised to provide us with information ASAP but never got back to us. By and large, folks represented by agencies would never, ever do stuff like that. A good, in-house, PR-savvy marketing person could also do this, too. Of course, some publications might like a naive CEO (better to extract info from or poke with a stick), but I personally think professionalism is a better path to take.

2. Helping journalists better connect with executives and companies

One area which I find PR folks do a good job of is help smooth the relations with executives and companies. Despite the value of speaking with reporters and editors, many, many CEOs — particularly those who have a technical and not a marketing background — are often hard to reach, very hard to schedule time with, and often not very approachable. PR folks do a good job of making sure that executives are available to reporters, that they respond to questions, and also are briefed on your interests in the company. When (once upon a time) I was on the marketing side of things at a high tech firm, I found it invaluable to have a PR agency who could help our CEO understand what reporters and editors were looking for, keep them on task and on message, and really getting them primed to talk to the press. From the conference/press briefing side, it’s amazing — especially at startups — how using a decent PR firm can smooth lots of the “back end” issues with connecting journalists and execs.

3. Being responsive to queries from editors and reporters

In our own experience with our press coverage, it’s absolutely a given that a company with a PR agency is more responsive from queries from our writers than one without. Really, companies ought to be better at this, on their own. But, it seems like something PR folks have done right is understand that responding, quickly, to editor and reporter queries is a must. There’s nothing that kills a story on your firm than having a junior marketing person email you back, two weeks later after you’ve called and emailed on a hot story. Even worse is the CEO who won’t call or email you back on a story you’re working on.

4. Acting as a resource, not a pitchman

Journalists (myself included) absolutely hate PR folks who bombard us with press releases we have no interest in, who act as used car salesmen, and won’t leave well enough alone if their company isn’t covered. However, PR folks can add lots of value to journalists when they act as a resource for journalists — whether that is tipping us off to genuine stories of interest, providing information on relevant topics, and connecting journalists with the right people at their clients. (ps. note to PR folks: stop bombarding me with press releases about startups in India and France)

it’s clear — despite a natural skepticism that a journalist has to apply to any information provided to them by PR folks — that PR, done right, can add some value — on both sides of the table, for both companies and journalists.

There’s been a “meme” — a running theme through many blogs lately — about the role of public relations in the world of blogging. Nicole Jordan — who, here in Los Angeles, is well known for her work organizing networking events–and is the PR person behind some of the higher visibility firms here — weighed in on the debate last night. (Disclaimer: Nicole also works with Clearstone Ventures and their porfolio firms, and Clearstone happens to be a sponsor of this blog and socalTECH).

There’s a natural (and I think, correct) tension between public relations professionals and the media. That tension continues — again, rightly so — between PR and bloggers. It seems a little bit on the more public and more hostile side nowadays, but I think that’s mostly because bloggers — many of whom haven’t been dealing with PR folks until recently — are feeling overwhelmed by the pressure of having people pitch them every day, spam them with press releases, and try to influence their coverage. Blogging — which, after all, has only recently grown from a personal effort by individuals for their own edification, into something which is starting to become more professional (ie., run by media companies, by organized teams of writers, for profit)– hasn’t had to contend with the constant pitch of PR folks looking to promote their companies, until recently. A lot of this is public relations professionals treating all bloggers like your old fashioned journalist, which–in most cases–is not the right approach. A couple of the reasons for the recent clash:

Most bloggers are not journalists, and do not want to be

A lot of bloggers — and in particular, some of the more vocal ones — don’t want to be journalists, don’t want to deal with PR folks, and don’t want companies trying to influence their voices. They want to engage with others, create debates on their site, and exercise their first amendment right to free speech. PR folks contacting them is anathema to them — it’s people trying to take away their right to say whatever the heck they want in their blog.

Bloggers want to be trend setters, not news reporters

Most blogs, even the professional ones, are trying to be the “trend setters” or “coolspotters” for their industry or area. They’re really not geared toward reporting the news and happenings, and don’t want to be — most bloggers are looking to be the “guru” for their area (hence the big focus on becoming a blogging “celebrity”) and not really interested in covering day to day news. PR and the pitching drives them more towards the news, and less toward the cool. They want to be the first — and only — blog covering a cool new device or company, or Internet service, not one of six blogs writing a review at the launch of the same firm.

Blogging is more about personal relationships, and social connections, than pitches

Blogging, at its core, is more about personal relationships and social connections, than about responding to pitches and/or tracking news from companies. Most bloggers are more interested in interacting with a community or readers, than having to talk constantly with PR agencies and marketers.

The crux of a lot of the issue — at least from my standpoint — is that PR folks are treating bloggers like they are a reporter at the local newspaper, which they aren’t. Personally, I think that PR folks can be a key part of the media relationship (more on that later), it’s just that you can’t use the same tactics with blogs (in most cases) as you have in the past with the press.