Yes, I continue to be stalked in Twitter land. I have not "twitted" (or is it "tweeted") in over a year, yet almost daily get messages that someone new has signed up to follow me on Twitter. Must be boring to follow me, as I have been standing in place in Twitter land. Yet the guys at Twitter continue to "succeed," by certain metrics. The media love them, elites all over the US have adopted it as a platform of "communication" (how much can you really say in 140 characters, perfect for the ultimate soundbite). And they continue to raise money from "serious" VCs.
Keep in mind, while they do theoretically have 6 million users (how many are like me?), as of today they have generated ZERO revenues. Nada. Nothing.
Now I think Twitter is inane enough that even as a non-profit it should be shut down -- I posit that their value proposition is negative. But that's another discussion. Now I want to limit myself to the question of value creation...why is Twitter worth anything in this environment, shouldn't the VCs wait to invest more until after some business model emerges (and has traction)? How much does it cost to run Twitter after all??
Twitter is succeeding at making fools of all of us that are calling for sanity in start-up culture, and has a negative influence on entrepreneurs (everyone wants to be Twitter).
Anyway, I think Jon Stewart best sums up my personal frustration on the service and its contribution to the world...see here:
Here's what continues to amaze me. They've (the VC's) pumped in $50m dollars into something that not only has no revenues but also has no chance of generating any earnings.
Lots of smart people can't figure out a revenue model other than the latest fad which is real time search. If real time search is to be the eventual winner then someone is going to have to attach a real revenue and earnings model to it. So far no one has been able to do that.
Why are VC's oblivious to earnings? Companies without earnings are basically insolvent and can only exist with money from the VC's. The IPO market is dead and M&A has dried up because the valuations (think number of shares outstanding in VC backed companies) are out of alignment with reality.
Here's what I see as the future... outstanding shares under 10m (so you can exit at a 5x or $50m) and the company is profitable and pays a very low dividend while it looks for an acquirer or continues to grow without further shareholder dilution.
If you cannot get to the above metrics then entrepreneurs and VC's alike are just working for a pay check.
Cheers,
Peter
Posted by: Peter Cranstone | March 05, 2009 at 04:13 PM