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The Roundup July 10

American penny one cent

Your local bank will happily lend you a few cents. That’s why they’re called small business loans.

Now we’re talking recovery.

The Obama administration is developing an initiative to take money from the $700 billion rescue program for the banking system and make it available to millions of small businesses, which officials say are essential to any economic recovery because they employ so many people . . .

A proposal being floated by senior Treasury Department officials calls for using the bailout funds to expand a government program that helps small companies borrow from banks at low rates to keep their businesses going, the sources said. These “working-capital” loans would come with few restrictions and could be used to buy inventory, hold on to employees and pay off short-term debt.

The initiative would bulk up the Small Business Administration’s most popular lending program, called 7(a). Lines of credit for small companies could greatly increase in size. If a firm failed despite receiving this help, the government would cover most of the losses on the federal loan, perhaps as much as 90 percent. Lines of credit act like the credit cards for companies — short-term, revolving debt used to pay a variety of immediate expenses.

(“White House Eyes Bailout Funds to Aid Small Firms,” Washington Post, July 10) This, actually, is a two-fer. Credit has been locked up especially hard for small businesses, many of whom have found their credit lines severely cut. This is credit that these businesses require just to do normal business, let alone survive in a downturn. On the other side, though, small business loans and lines of credit represent a significant chunk of bank assets and income, particularly local and smaller banks. Tightening small business credit has been a drag on these banks’ income statements. Buying up troubled assets, it turns out, hasn’t made a dent in the small business lending market, so the Obama Administration is taking square aim at the problem by reducing the risk to lenders. This benefits small business and especially benefits the banks (they get the small business lending income with only a tiny share of the risk). Sounds like a winner to me.

A tip of the hat to GM.

Following the completion of its unexpectedly swift 40-day restructuring under bankruptcy protection, GM is now 61 per cent owned by the US government, with smaller stakes held by Canada, a United Auto Workers union healthcare trust and former unsecured bondholders. The restructuring has cut debt from $54.4bn to $17.3bn. . . .

GM aims to repay the loans sooner than their 2015 maturity with the help of private-sector financing. Mr Young said it might aim to launch an initial public offering next year – possibly as soon as the second quarter of 2010, depending on the state of equity markets. GM, which has long been criticised for arrogance and complacency, also promised a “new way of doing business”.

(“Chastened GM sets out on a fresh start,” Financial Times, July 10) There were a few missed opportunities, and I’m still not convinced the GM bailout helps the industry retool for a post-carbon economy, but the current bailout is starting to look more like what Mitt Romney prescribed in a November 13 NY Times Op-Ed piece when he wrote, “Detroit needs a turnaround, not a check.” Of course, what the Mittster was calling for was not a turnaround, but a dead end for GM and Chrysler. Be that as it may, I would pretty much say that what Henderson, his executives, and — to give plentiful credit where plentiful credit is due — the Obama Administration accomplished over the past couple months pretty much fits the turnaround bill. So I’m cool with it. You?

Oh this is a happy day, this will have been another happy day! (Pause.) After all. (Pause.) So far.

Venture capitalists believe the worst of the financial crisis is behind them but are not expecting a rapid recovery in initial public offerings and deals this year, a quarterly survey released on Wednesday showed.

Of the 42 venture capitalists who responded to a survey for this quarter’s Silicon Valley Venture Capitalist Confidence Index, some expected a gradual resumption of M&A, investment and initial share float activity in the second half. . . .

Venture capitalists have had to use precious capital to keep their existing start-ups afloat because they cannot sell them. As a result, they lack money to invest in new start-ups.

“The backlog in maturing companies will need to clear before start-up activity returns to the pace seen in recent years,” said Christian Cortis of Advanced Technology ventures.

The 5-year-old Silicon Valley index, penned by University of San Francisco Associate Professor Mark Cannice, peaked in the second quarter of 2007 at 4.38, then began dropping slowly before it plunged in 2008. It bottomed out at 2.77 in the last quarter.

(“Venture capitalist confidence up, still wary: survey,” Reuters, July 9) Recession journalism has a curious sort of structure, a “one hand giveth” and “another hand taketh away” ping-ponging that will probably go on well into the recovery. “Investors see hope” but “there’s still a way to go” or “home prices hit bottom” but “inventory continues to build up and prices continue to decline.” So what does this survey mean? It means the same thing today as yesterday — if you’re after VC funding, you must show the viability of your venture much more rigorously than before. Much of VC funding is going to proven concepts rather than slick words, fake financials, and a PowerPoint presentation. The recession rules of VC funding haven’t changed, just the “survey says.”

If you hate Microsoft and think Bing is from the devil’s bunghole, you better start using Yahoo! Search. Like right now. Search ten thousand keywords before you go to bed. Twitter all your friends to do the same. And if you don’t write for TechCrunch, then feel free to have a life.

For the second time since Bing’s launch just over a month ago, StatCounter Global Stats, which analyzes Web site traffic, reported that the new search engine’s market share has passed that of the Yahoo search tool. According to the StatCounter report released today, Bing held a 12.9% share of the U.S. search market, while rival Yahoo held 10.15% at the start of July.

Both Microsoft and Yahoo are still well behind market behemoth Google, which commands just about 75% of the market, according to the report. . . .

Aodhan Cullen, CEO of StatCounter, said in a statement that the latest figures may have resulted from a positive review of Bing that appeared on the New York Times Web site on July 8 and in its print edition a day later. “While its lead over Yahoo may not last into next week, our data suggests that it is slowly but surely closing the gap.”

(“Microsoft Bing Booming: Yahoo Appears in Its Sights,” CIO, July 10) Alright, joking aside (I like poking TechCrunch because, as far as Microsoft is concerned, they’re like the Fox News of tech blogging — the word “Microsoft” renders them incoherent with lunacy just like “Democrat” does on any typical Fox News day), the steady growth of Bing (on average, they’ve been increasing their average market share by 25% every week, which is pretty darn impressive) and its generally high quality as a search service means that it has to enter your search engine marketing initiatives. Don’t be fooled by the occasional days that it outdances Yahoo!, it is still a distant third. But its steady growth and Microsoft’s ability to keep it floating mean that you, as a small business or entrepreneur, should include it in your SEO/SEM strategies. Or cede that space to your competitors.

“Παράβαση εμπορικών σημάτων.” “상표 침해.” “商标权受侵.” “Infracção de marca registrada.” Rosetta Stone adds a new vocubulary entry to its language learning CDs complete with a picture of a fat pig with a Google logo.

Rosetta Stone Inc. on Friday sued Google Inc. for trademark infringement, alleging that a change in the search giant’s policy facilitates the unauthorized use of its brand by competitors and software pirates.

Rosetta Stone, whose products teach customers to speak foreign languages, said Google’s Adwords advertising policy was changed last month to let advertisers use its trademark or similar terms in the ad text even if they don’t own the trademark or have approval to use it.

(“Rosetta Stone Sues Google For Infringement,” Associated Press, July 10) Those who regularly read this blog know exactly what I think of Google’s profiting from trademark infringement. This is a whole field full of thorns that is going to take decades to sort out. But just a few minutes on pirate ships like RapidShare or Usenet will show you that Rosetta Stone has much bigger fish to fry if it wants to stay in business. Not only that, if “information wants to be free,” the prohibitively expensive Rosetta Stone language series teaches entrepreneurs exactly how to do the same thing at a low enough cost to be free. Rosetta Stone simply uses one multimedia template and just “inserts” the right language into the template. At four or five hundred bucks per “course,” it’s an all-profit sort of affair for them but a bit of a rip-off for you and me (especially since a) it’s not that effective and b) the template often has concepts that don’t exist in every language, but they slot a word in there anyway). You can easily reproduce on the Web a similar multimedia template for, oh, ten thousand dollars and pop in languages at no more than one or two thousand dollars a pop, thus giving you a Rosetta Stone language learning library at about 50K. If you knew what you were doing, it could be just as good (or better), just as engaging, and just as limited in actually teaching language. Then give the whole shebang away to every schmoe who bops into your Web site. Get your Google AdWords account (and bid on “Rosetta Stone” because, well, because you can), build an audience, get some advertisers (say, Rosetta Stone), and you’re sitting on a pretty good seven or eight figure income for the next few years. There are many supremely lousy attempts at free online language learning (in what universe can you learn a language just be memorizing vocabulary?) and some genuinely useful ones, but somebody will eventually get up the gumption to put Rosetta Stone out of business by doing something very similar for free on the Web. And, by the way, just to reward you if you’ve read this far, we will be giving away a free copy of Shoestring Venture: The Startup Bible to the first commenter on this post to identify all four languages in the heading to this article. A $34 value! Free! Just our little thank you for reading all this claptrap.

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One Response to “The Roundup July 10”

  1. Hi Richard,

    To answer your question and hopefully get the free copy: the languages are Greek, Chinese (do I need to tell you what dialect?), Portuguese, and English.




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