A few things Mark Wallace

Month: September 2012

More Evidence of Maturing Private Equity Markets

Entrepreneur, investor, and “data guy” Mike Greenfield has a nice post on how AngelList quantitatively changes the investing game, which lines up nicely with a few of the points I was trying to make in my recent post on whether startup valuations are overinflated as a result of programs like Y Combinator.

Mike finds that startups funded through AngelList end up with a more diverse pool of investors than those that locate investors through more traditional word-of-mouth channels. This is not necessarily a surprise, given that AngelList seems designed to flatten the world of private equity financing and give more people on either side of the table a look at more deals — but it is a nicely crunched set of numbers. And to my eye it’s another indication that the private equity markets — or at least the corner of the market that tech startups and venture capitalists inhabit — is passing into a phase of greater maturity, where more information is available to more players, and the playing field is leveled a bit in comparison to periods that have come before. As Mike puts it, “As AngelList and crowdsourcing grow, the impact of the old boys’ clubs will shrink. For companies, the pool of investors is growing.” Not a bad result.

Season of Change?

Around here, everyone wants to change the world, but it seems that late-September / early-October is the season when a lot of those hopes take shape — if the conference schedule is anything to judge by. Here’s a (very) short list of conferences pushing change in the coming months:

Clinton Global Initiative
The Clinton Foundation holds the annual meeting of the Clinton Global Initiative on Sept. 23-25 in New York City. CGI is notable in that the conference has a very strong focus on commitments for action from corporations and global leaders — although the track record of delivering on those commitments is debatable.

The Feast
The Feast is a young but recently expanded conference, also being held in New York, Oct. 3-5. With its Social Innovation Week, The Feast brings together talks, workshops, and hackathons featuring everyone from Cirque du Soleil creative directors, NASA technologists, startup CEOs like Bre Pettis, and more. “We’re done waiting for the world to change,” states the conference Web site. “The Feast Conference gathers remarkable entrepreneurs, radicals, doers and thinkers that bring their talents to the table to make life better. Our attendees don’t just sit back. They’ll be rolling up their sleeves at roundtables this October to respond to challenges issued by visionary speakers who dare to ask the question, What does the world need now?” Again, the proof’s in the follow-through. It would be great for the site to feature the results of previous conferences more strongly, if anything.

The Social Capital Markets conference — which bills itself as sitting at “the intersection of money and meaning” — is also held in early October, slated for Oct. 1-4 here in San Francisco. SoCap is “dedicated to increasing the flow of capital toward social good,” but has proved slightly unexciting, from all reports, and fronts a mixed bag of panelists so far. If anything, it’s the money that appears to be under-represented. 2011 attendee Nell Edgington has a good account of issues at last year’s conference.

Of course, all of the above raises the question of whether chin-wags like these are really the places from which change will emerge. I do think it’s largely a bottom-up issue, as The Feast holds, but I also think it can’t happen without support from the top, as the CGI is well aware. Stay tuned.

Lamest Corporate Social Responsibility Press Release Ever?

L’Oreal, a $5 billion multinational that bills itself as “the world’s leading beauty company,” had a press release on the Corporate Social Responsibility Newswire yesterday, flagging the $2 million it raised for the Children’s Specialized Hospital Foundation, which “serves children affected by brain injury, spinal cord injury, premature birth, autism, developmental delays, and life-changing illnesses.”

I’m positive L’Oreal must be directing a significant amount of money each year toward corporate philanthropy (see below for more on that), but my reaction when I saw that headline was, “$2 million? Really?? Is that it? Surely you can do better than 1/25th of one percent of your annual revenue for needy kids.” And on closer inspection, this turns out to be $2 million the company has raised not this year but since 2008. And it isn’t even L’Oreal’s money, but donations it helped raise through a charity golf outing.

I’m not often moved to write blog posts like this, but the “news” in this press release is so lame as to be offensive. In fact, L’Oreal devotes a significant amount of resources to its philanthropic foundation, which appears to be doing good work of various kinds, all over the world. Why bother, then, to crow about a fairly paltry sum that the company itself didn’t even donate? Probably for the same reason that Unette Corporation, Century Packaging, Inc., RockTenn, Packaging Corporation of America, and Walker International are mentioned in the release as “suppliers, donors, and sponsors” — for the corporate social irresponsibility value of cheap advertising.

This is very obviously not a new issue. Nor is it something that’s going to shatter the earth. But given the fact that it’s a struggle to undertake truly valuable corporate social responsibility (CSR) programs, or even to highlight the efforts that are worthy, putting out a press release like this only makes the task more difficult. Would it have hurt L’Oreal for the headline to have read “Children’s Specialized Hospital Foundation Raises $550,000,” which is actually what happened?

Then again, L’Oreal is a company devoted to surface and image; how could they have played it any other way?

Maybe All Journalism is Service Journalism

Back when I was writing for print magazines on a more regular basis, most editors made a distinction between “service journalism” and other kinds of news and feature writing. Not news and not long-form feature or narrative writing, service journalism provides strongly consumer-oriented information, usually designed to help readers make purchasing decisions of one kind or another. Being the narrative snob that I was, I generally loathed this kind of writing. Being the freelance writer that I was, however, I generally took such assignments when I could.

More recently, I’ve been looking at journalism and media from a new perspective, trying to bring to bear my last half dozen years or more in and around tech and startups. Part of what I’m interested in, of course, is the evolution of journalism and media in general. And part of what I’m starting to realize is that all journalism is service journalism, in one way or another. And therein may lie a signpost.

What’s interesting to me is the parallel to digital marketing and the value of audiences: readers, viewers, members and users are more valuable to marketers at the moment they’re making a purchasing decision. Hence the emphasis on reaching targeted and qualified traffic. For marketers, it’s often more valuable to get in front of a few people whom you know to be interested in the product you’re pushing than it is to get in front of a larger number of people who may or may not care. Hence the value of service journalism: the readers who pay the most attention to a fashion magazine article on makeovers, for instance, are likely buyers of lipstick and eye shadow. If I’m a makeup company, I want the ad space across from that page — and I’m a lot less interested in the ad space facing an article on politics. If I’m a movie company, I want the ad space across from the reviews page. And so on.

But general-interest media companies — companies that do “journalism” proper (like The New York Times, for instance) — face a curious problem in that the product they’re pushing is not the topic of an article, but the article itself. This is part of what’s been so troublesome for them in trying to build (or rebuild) audiences that monetize well in a new (digital) medium. What’s been striking me lately, though, is how closely general-interest news and information resembles service journalism, if viewed from the correct perspective.

Take the upcoming presidential election. Whether you’re reading about Romney’s tax returns, Obama’s comments on entrepreneurship, or our allegedly broken electoral system, you’re also gathering information that will help you decide who to vote for.

The same goes for a host of other not-immediately-purchase-or-product-related content that nonetheless helps inform a range of decisions. Stories on the economy might help guide you as to whether now’s a good time to look for a new job. Similarly, reading about the Mars Rover may expand your notion of the possible — both for the space program and for yourself and the people around you. Even a complex story about a mining venture in Afghanistan can inform your choices as a consumer and civic participant. It’s a stretch, of course, to call those last two examples service journalism, but I don’t think it’s inappropriate — and I do think there’s a helpful lens in it: In one way or another, almost all journalism can be called service journalism insofar as it informs a reader’s decisions, whether in the near term or further down the line.

And that’s the small insight here: Journalism is generally taken to have the broad and lofty goal of “informing the public” of various events and situations. It is then the reader’s responsibility to make informed decisions based on that information. But what if those decisions were surfaced more in the writing process? What if journalism’s lofty goal were to help readers make very specific informed decisions about the very specific topics that are dealt with in a given article, whether it’s makeup purchases or political choices or even the existential question of who we are or can be?

This is almost too simple an idea to mention, but I don’t think it’s top of mind for most journalists on an everyday basis. There’s a difference between writing an article that examines the various sides of an issue like genetically modified food additives, and writing an article that helps the reader choose whether to consume and/or support such things. If it were more explicitly a piece of “service journalism” it might read differently — and attract a more focused and monetizable audience. Maybe there’s a middle ground between so-called “unbiased” reportage, and baldly market-driven product reviews. Maybe there’s a way to make more articles more useful to more people, simply by keeping in mind what decisions the article may be driving — by keeping in mind the specific audience segment that’s being targeted by the article, and the specific decisions that audience needs help in making.

I doubt this is what’s going to “save” journalism. (In fact, I don’t think journalism quite needs saving, though that’s a matter for another post.) But I do think it can help editors and publishers think more productively about how to provide a product that will generate more revenue in an age when that task has grown difficult.

Will the Public Company Soon be a Thing of the Past?

The public company — at least in its current form — may be on the wane, according to economist Nancy Folbre. Folbre, who specializes in the interesting-sounding discipline of the economics of care, argues in The New York Times that “public corporations . . . are now waning in significance.”

Quantitatively, Folbre notes that there were twice as many public companies in the US in 1997 as there are today, an eye-opening statistic in itself.

She also cites a number of studies and trends, including the increasing concentration of public equity in the hands of investment funds, and the rise of private equity firms. This last makes it easier for companies to raise money outside the public stock markets, and is interesting to me in part because it matches up with financing trends I noted in an earlier post here.

Is the public company dead? Probably not. But sources of corporate financing are diversifying, and it’s likely that the landscape going forward will contain a larger proportion of privately financed companies competing on the same level with public companies. There are a lot of implications in this shift, but here are two I find interesting:

  • individual investors will need new ways to participate in the financing of private companies
  • regulatory regimes will likely need to be updated in order to provide some of the same protections to private investors as are enjoyed by public investors today, even if those protections take slightly different form

It will be interesting to see if the courts and agencies can solve the regulatory question in a way that retains some differentiation between the public and private equity markets, while at the same time broadening access to the private markets so that more people can participate. It’s possible that a third class of company will need to arise. I’ll save any speculations on that for a later post, but I’m interested to see what happens and hear what people think.


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