Tech Entrepreneurship Recession – Microsoft Yahoo – Tea Leaves;

War! What is it good for! Absolutely nothing! – Say it again!

Are wars really good for business? Is tech entrepreneurship in recession heading toward depression? The battle between Microsoft and Yahoo is reaching it’s climax (if not already). However, there are some very interesting and unique perspectives come from two blog posts that jumped out at me – Kara Swisher and Fred Wilson. Kara has the funniest headline saying “Jesus is coming” with the storyline about the inside scoop on the ‘dance’ between the two. What strikes me with Kara’s post is that Yahoo might already be defeated in the ‘braindrain’ that they have been experiencing. Even if Yahoo survives is it already dead on the vine?

Fred Wilson only draws a reference to the battle in his post about liquidity – saying that with no IPO market we are in trouble and worse the tech giants are playing with assets like toys. I think that Fred is on to something with no liquidity (other than M&A by big firms). Is this really a robust market for innovation where the big guys are doing all the acquiring? Is this the ecosystem that produces good entrepreneurship?

What ties both these posts together is the trend that acquisitions might not be the best for innovation – Kara bluntly states that AOL’s acquisitions aren’t doing well. While Fred says it’s great to get the cash but Yahoo hasn’t done well with their acquisitions. Meanwhile the capital markets are a mess.

As an entrepreneur with four kids I’m concerned about the prospects for all entrepreneurs in this current environment. Maybe I’m just not feeling good today. Startups should have some friction, but not outright frustration. I’ve been doing early stage startups for 10+ years and never seen this much frustration since 2002-03. We are in a tech recession or at least a grinding halt.

I’m one of the most optimistic guys (all entrepreneurs are), but my mood on this startup market: Bear

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New Sheriff in Town – Dan Farber New Editor In Chief at Cnet

Tom Foremski writes a great story on the new editor in chief at Cnet – Dan Farber.  Tom lists the changes that Dan is making at Cnet. 

Cnet has a big advantage over everyone else right now for three reasons:  1) Dan knows the business both old school and new school (blogging), 2) they have the infrastructure, and 3) they know how to put out massive amounts of content.

I talked with Dan last week about some of the changes at Cnet – he said that the big goal is to just coordinate the systems -hmmmm …. translation: cnet will keep pumping out good content in volume and will start cross linking;  What does this mean … Look for cnet to parlay their strong reporting and analysis capabilities with blogging infrastructure.  Look for Cnet to become the new leader on the Techmeme Leaderboard. 

Maybe the line “There is a new sheriff in town” applies here and his name is Dan Farber.

Here are some highlights on the changes at Cnet under the leadership of Dan Farber (source Tom Foremski):

-Different CNET departments now publish using the same template.

– Publish a story as quickly as possible, edit it later.

– Stories are updated constantly.

– Adding the right keywords and tags to make stories discoverable by search engines. About 40 per cent of CNET traffic comes from search engines.

– Use Internet standards whenever possible.

– There is no end to the work day, you are always on call.

– Everybody blogs.

– Create synergies between news, reviews, analysis, and blogs.

– Getting journalists to put in web links to non-CNET publications. “It’s about being part of the web and not separate from it,” he says.

– Carrying a pad of paper and pencil is not enough. Journalists also take photos, videos, and make podcasts.

Are Web 2.0 Entrepreneur’s Love Affair with Venture Capital Over

Cnet has a story headline “Is venture capital’s love affair with Web 2.0 over?”– Ironic??

According to this massive trend 2007 deals are down an amazing amount – total deal numbers down an amazing 5.   “Web 2.0 deals in the Bay Area actually dropped from 74 deals in 2006 to 69 last year” -Wow.

Entrepreneurs are starting companies that require less capital and no venture capital at all.  Maybe entrepreneur’s love affair with venture capital is over.  It’s clear to me that entrepreneurs that I talk to are bootstrapping longer and financing ventures themselves.

I hardly think that a reduction of 5 deals validates a venture capitalist trend.  Most VCs are not that savvy on Web 2.0 and are generally skeptical on web deals.  The ones that do get it are doing many deals.  Jeff Clavier has already pounded out 16+ deals in his new fund.

Entrepreneurs Beware. Yahoo Buyout Could Kill Technology Startups? Advice: Be an Arms Dealer.

Entrepreneurs beware Microsoft buying Yahoo could shut down the tech startup scene.  It could send the startup climate back to 2001 levels – nuclear winter shut down.  I lived through 2001-2004.  It was ugly.  

Brad Burnham has hit on a narrow topic about the downside of the Yahoo buyout for Silicon Valley.  Brad’s story is very relevant with ‘macro’ implications to the tech world not just Silicon Valley.   This deal could cripple startup activity.

Efficiency for Microsoft means leverage with suppliers.  Translation:  Startups are suppliers and Microsoft just became Walmart.  This could have a chilling effect on the VC and tech investment community.  This new industry structure puts even more of an emphasis on ‘hits’ or category specific deals.   If the Venture Capitalists are confused today can you imaging what they will do going forward.   This could get ugly. 

Advice for Technology Startups and VCs:  Understand where your company is in the pecking order in this war.  If you’re not an arms dealer then you might want to rethink your strategy. 

Update:   others are thinking the same….  A VC -Fred Wilson; Opportunity for another big player to bid:   News Corp. 

Yahoo Stalled: No Wind in Their Sails? Google isn’t stalled. What’s the Problem? New CTO?

Last year Jerry Yang took over as ‘Captain’ Yahoo but their ship is stalled.  Where are those new ‘sails’ to capture the new winds that are clearly blowing Google and Facebook’s way?  Yahoo needs to change the game.  Where’s the competive strategy?  Where the “Eye of the Tiger” attitude? 

Businessweek had the best analysis on Yahoo’s situation around the recent layoff and future prospects for success.  Display advertising is feeling the pre-recession jitters but not search (or ecommerc) advertising.  Yahoo keeps losing ground in search to Google.  According to Nielsen Online‘s numbers, usually the most conservative measure of the market, Google’s share of searches in December was 56.3% to Yahoo’s 17.7%, and Google got 70% more searches per searcher than Yahoo.

Yahoo needs new products and fast.  Jerry Yang says they are focused on investments on new initiatives.  As Yang’s vow to keep spending on some initiatives indicates, Yahoo’s hope remains coming up with new services that catch people’s imagination as Google, MySpace (NWS), Facebook, and other sites have.

I’ve been predicting a Yahoo comeback and openness for sometime.  Look for Yahoo to join opensocial and compete in the web 2.0 infrastructure. 

New CTO?  What does it Mean:

Silver Lining in new CTO hire:  One promising sign from their new hire, Ari Balogh, is that he’s an infrastructure guy.   He knows how to deal with scale and product rollouts that are managed service based.  What does this mean?  Yahoo could develop (fast) a significant position against both Google and Microsoft Live if Ari Balogh and team can integrate services and leverage user data for new products – a kind of “Mega Mashup” product strategy.  The portal model is dying and advertisers are voting.   

Also look for possible Data as a Service product set.    Yahoo has so many possibilities but they need to pick a few and go with it.   Yahoo has all the ‘raw materials’ and the audience to roll out ‘instant’ killer products. 

For Yahoo to succeed it’s all about competitive strategy.  Can’t wait to see how they execute their plan.