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What happened to bootstrapping?
At some point in the past millennium you could start a business by focusing on the necessities and scrapping the luxuries. You could finance the business yourself, or if needed, use your credit cards or borrow from a friend or family member.
I say this because of an acquisition that was announced yesterday. CBS has reportedly paid $5 million for the Wallstrip video podcast. Not only that, but it’s said that Wallstrip initially received $600,000 in funding from angel investors.
Now, I don’t have anything against Wallstrip. It’s a very nice video podcast and I try to catch an episode every now and then. But this is either a serious sign of A) Insanity or B) Bubble 2.0.
There’s no way or reason why a show like that, Rocketboom, or any of the other video podcasts would need $600,000 to operate. You have a camera person, a host, a camera, some bandwidth, a video editing app, and the occasional prop.
I try not to make fun of old people, but it’s almost as if someone at CBS just learned what a podcast is and thinks it’ll be the next big thing. “This could be the edge we’ve longed for over other networks. Quick, write them a cheque!”
6 Comments
Eric said on May 22, 2007
$5,000,000 - wow…
Aaron said on May 22, 2007
Don’t player hate.
Dave said on May 22, 2007
Honestly, sounds like Bubble 2.0 to me. Maybe not a crash, but I think companies are HIGHLY overpaying for some of these companies. But hey, if there is ROI and then some, I’m 110% wrong.
Robert Dewey said on May 22, 2007
The production of Wallstrip was around $1,000 per episode, 5 times per week. The funding would have allowed them to run up to two years, not including any additional costs. During that time, they would have most likely needed to become profitable in order to secure another round of financing.
Why $1,000 per episode? The producers get a big cut, and then you have to add in other employees (i.e. Lindsay). Obviously that particular production team was the right choice, even if expensive. They hired Lindsay, and that’s the sole reason for acquisition (she was contracted to Wallstrip, and the only way to get her was to acquire the whole company).
CBS is simply looking for the next Amanda Congdon (sp?).
Eric said on May 22, 2007
Bubble? How about no. CBS spending too much on a video blog is going to have zero impact on anything other than their bottom line, and it’s not even a pin prick.
Acquisitions don’t cause bubbles, irrational financing does. If Google buys YouTube and never makes a dime on it, who gives a shit - they have the money lying around to do just that. CBS is the same. A bubble and subsequent crash happens when over-invested companies go IPO prematurely, go big on the market, and then go tits up after investors realize they’ve spent money on nothing. They bail out, essentially lighting fire to millions or billions of dollars. Poof. Gone. Then investors stop spending, innovation slows, and only the strong survive.
CBS spending some reserves on a half-popular video blog isn’t a sign of anything other than a bad decision at a Monday board meeting.
Travis said on May 22, 2007
The big 3 have been paying billions for ad networks over the past couple of months, Microsoft is trying to acquire Yahoo, Sony paid $65 million for Grouper last year.
You may not label it as a bubble in comparison to the billions blown back in 2001, but it is a sign of the beginning of a build to sell out craze, which usually ends in a recession.
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