Darren Herman

A byproduct of my fairly bold post about startups and their PR hype was the great conversation that started around the dot com deadpool.  I’m not looking to start up another Fucked Company like Pud did back in the day but looking to explore the companies who are failing and find ways to revive them in one of many different capacities.

Before I get into that diatribe, I want to open conversation around private equity and LBO’s that are occuring in the market.  I’m not going to pretend to be my friends Roger or Howard with their domain knowledge of the market, but why do private equity cos. believe that they can purchase companies and turn them around?  How does a huge conglomerate like KKR believe they can turn around a company any better than someone else?  I’m fascinated to watch these large operating funds acquire assets and turn them around… but then again, isn’t this what I’m looking to do with the dead dot coms?

So, back on topic.  There has been a lot of money invested into the market by venture capitalists in the past 4-5 years and many of the companies who received early injections of capital are either at a point where they need to raise more, exit, or keep on trucking because they’re cash flow positive and/or profitable.    Unfortunately, the amount of cash flow positive/profitable companies in the market are less than the amount of companies who need to raise more money.

What if they do not raise more money?  They go into the dot com deadpool.  I’m sure there are going to be many companies swimming (so to speak) that may have either good ideas or solid technology that just never got utilized to the extent it could have.

Will Google/MSFT/AAPL come to the rescue? They have about $50 billion dollars in cash that they can acquire either market leaders or starving companies.

I see a huge opportunity in acquiring assets and piecing together a solid company or portfolio of companies.  One hesitation though is that to me, technology is an enabler and that if we acquire technology, it’s only a matter of time until someone else creates something better.  I don’t ever want to get into a feature vs. feature comparison because it’s a losing battle.  So, at the end of the day, what’s the asset you’d be acquiring?

If we make a list of potential assets, we have:

1. People
2. Technology
3. IP (patents, copyright, etc)
4. Contracts (biz dev deals, real estate, etc)
5. Misc. (anything else I forgot?)

I’m thinking the most value here is within #1, #3 and #4.  If these are what are valuable, then why wouldn’t someone else come and acquire them?  Why would they make their way to the dead pool?

How could someone play in this market the correct way?  Any thoughts?