Building a billion-dollar enterprise, 17 - a mega-deal sparks questions

Well, we haven't have had any "They're-spending-a-billion-dollars-for-WHAT??" deals lately, so I guess we were due for another one:

"Yahoo to buy Tumblr for $1.1 billion." 

Tumblr, like Instagram, the last billion-dollar acquisition in the tech space, is not making money. Will Yahoo make money with it? Who knows?

I don't even have a response for this. Well, actually I do: deep skepticism, fueled by the simple fact that I don't see Yahoo being smart with what they already have, so I don't see any particular reason to believe that they will be smart with Tumblr.

But I still have a Yahoo account or two, so I will keep up with what they're doing as a user.

For me, the news of the deal sparks a conversation with myself that I've never really had before, fueled by questions like:

1. How much would an investor pay for Homewood Nation?
2. Would an investor pay anything for Homewood Nation?
3. How can I get a credible answer for either of those questions? - and the real biggie:
4. How can I make Homewood Nation more valuable to an eventual buyer?

I call #4 the biggie because while I don't particularly intend to sell Homewood Nation itself, Homewood Nation is part of the package that I do want to sell in - a little less than four years now. Or that I iwant to sell pieces of between now and then.

I think #3 is the place to start.

These questions are not just mathematical. They pierce. I have spent countless hours on Homewood Nation (and its predecessor, "My Homewood,") but my bank accounts suggest that in the end, I have only created stuff, without creating value. I am broke. As in, "Can I make it through the month without overdrawing my accounts?" As in, "Do I need to tap my IRA to keep going for another three months?" (It's a tiny IRA. I've made many mistakes.) And being broke pierces, because it says to me that in my 61 years, I have in sum taken more value from the world than I have created for the world. And I don't wanna be that guy. On the contrary, I want to be the guy who creates insane value. I've always wanted to be that guy; why haven't I become him yet? Is it too late to become him?

I believe I have created value. Perhaps I need to believe that I have created value, in order to keep breathing.

But so far, no one is saying so with dollars.

A friend said on Facebook once that every man woman and child in Homewood should give me $5 a month for Homewood Nation. I took that as a great compliment, and as encouragement to place a "Donate" button on the website, and to run my first donation-seeking campaign.

Over the course of a month, one person donated $50. He does not live in Homewood.

I am self-conscious about talking about my finances, but it seems important to note where I am now, as part of the story. Let it go on record: in February 2013, Green entered a prolonged period of something that he said might have been depression. For months, he was haunted by the failure of his PeaceBuilder game, which he had hoped would be Luminaria's first moneymaker, and would fund the further development of Homewood Nation.

During this time, every item that he posted on Homewood Nation "seemed like an exercise in futility. Who was reading? Who cared?" This was despite the fact that the website had attracted new contributors such as C. Matthew Hawkins and Joshua Devine. While he dreamed of growing the website, Green despaired of ever being able to pay writers to produce the robust content that he felt Homewood deserved.

When he wrote the blog entry on May 20, the first draft of which included a section written in the past tense that ended by describing the shutdown of Homewood Nation at the end of that month, "I told myself that this needed to be part of the record, too, so that when people came along later to see how to build a billion-dollar company, they would see that sometimes it meant just slogging through my own internal shit. In fact, it meant that A LOT of times.

"Make no mistake about it," he said. "Building a business of any size, from the ground up, will absolutely turn you inside out."

Building a billion-dollar enterprise, 3

Just got back from a trip to Chesapeake, Virginia. On Friday, I joined a bunch of other kinfolk in attending the change of command ceremony in which our nephew, Vernon H. Stanfield, assumed command of his first ship, the USS Whidbey Island.

On Sunday, J. and I celebrated my 60th birthday with dinner and a movie ("The Artist").

Yesterday, while I wasn't looking, Instagram announced that it is being acquired by Facebook.

The price? $1 BILLION.

Again, remember what Instagram is - a company with one product that does one thing, and which has zero revenues (what have co-founders Kevin Systrom and Mike Krieger lived on til now?).

And now Mark Zuckerberg says, "I want it. Here's $1 billion."

Of course, it's not an all-cash deal: Instagram's owners will get a combo of cash and Facebook stock. Still, the deal is a staggeringly powerful reminder that going public is not the only way to establish a company's value. Another is selling off pieces to private equity. And a third is by selling it to another company.

The tricky thing about the third way is that the price being paid may bear no resemblance to what the company would fetch on the open market. I doubt that if Instagram had done an IPO now, it would have weighed in at $1 billion.

But that is neither here nor there. When a single buyer makes and offer, however cockeyed, that buyer IS the market.

My #1 takeaway? Not only is it possible to build a billion-dollar enterprise in five years, it is possible to do it IN 18 MONTHS (Systrom and Krieger launched Instagram in October, 2010).

Meanwhile, another news item invites a contrast-and-compare exercise: Tumi Holdings, Inc., which makes high-end travel bags, is planning an IPO to raise up to $319.3 million. At the high end of the proposed price range of $15-17, the company would be valued at $1.15 billion, just a sliver more than Instagram.

Tumi has been in business for 25 years.

March Monday morning media madness

Nothing to do with basketball, but I've just noticed a couple of articles from the world of media that have my head spinning a bit.

First, from TheWrap.com, the news that talk-show titan Larry King has partnered with Carlos Slim to create a digital television network.

The article says the network will be headed by one Jon Housman, who "previously served as president of digital journalism at News Corporation and was the publisher of the Wall Street Europe."

The New York-based network, dubbed Ora.TV, will begin programming later this year.

This is just the latest example of full-blown networks seeming to appear out of thin air since most U.S. broadcasters made transition to digital television on June 12, 2009. Back in September, Bounce TV, geared towards the mature African-American demographic, made its premiere, less than six months after its founding last April. 

According to Wikipedia, "The founding group and initial ownership team includes former Atlanta mayor and United Nations Ambassador Andrew Young, Martin Luther King III, and Andrew "Bo" Young III; the group also includes Rob Hardy and Will Packer, the co-founders of Rainforest Films, a top African-American production company."

Fifty years ago, creating a network meant building stuff. Now it seems to mean - primarily, if not exclusively - just making the deals. The stuff - the hardware, the infrastructure - is already there. There's even enough programming already in existence to launch a network without creating any new material (Bounce's first program was an airing of "The Wiz."). And if your deal is for a single channel rather than a network, you can just run video of chickens being roasted. Snag the asset, and you can figure out what to do with it later.

Anyway, a talk show host and a telephone magnate are creating a television network to be headed by a guy with a mainly print background. Verrrrry interesting.

Second, also from The Wrap - CNN is in talks buy Mashable, and may pay $200 million.

WHAT???

Granted, Mashable's 20 million readers a month make it "one of the most popular sources of technology information on the web," but does Mashable make enough money to justify a $200 million pricetag? Or is CNN, more than a decade after the dot-com bust, just buying eyeballs?

Well, maybe the big boys are just looking for eyeballs again. The third piece of news that made me blink is from the Wall Street Journal: Instagram is preparing a round of financing that would value the company at $500 million.

This, in spite of the fact that Instagram's "success in attracting users has yet to translate into significant revenue in the way it has for some desktop-oriented Internet companies."

This, in spite of the fact that Instagram is only an app, "that lacks the real estate of a desktop for displaying advertising."

Ah, but it has 15 million users on iPhones alone, and the company has plans to port the app to Android.

Okayyyy.....

Over the past year, dealmakers have been partying like it's 1999. And that was before Yelp's IPO trading pushed its valuation to nearly $1.5 billion. In eight years, Yelp has yet to turn a profit.

Really makes me wonder what kind of valuation Luminaria Productions could fetch if I devoted myself to getting eyeballs on "Homewood Nation." Maybe I should stop asking what it would take to make $5,000, $10,000, or even $50,000 or $60,000 a month (the latter figure based on the datum from Mani Saint-Victor, CEO of game development company Marveloper, that the average online game pulls in $2,000 a day), and start asking what it would take to build a billion-dollar company.

Whoa, Elwin - do you seriously believe that you can build a billion-dollar company?

Not necessarily. But I absolutely believe that if I act like I can, I might.