02 Feb Post-January, tech entrepreneurs have reasons to be depressed
Depressed?
Considering we just escaped January – a notoriously depressing month because of the post-holiday letdown and the cold, dark and dank weather – that’s no surprise. In fact, an English psychologist calculated that January 24 (just one week ago) was the most depressing day of the year.
While technology entrepreneurs already bear an extra psychological burden because of the challenges they face, their depression might have escalated last month for reasons that have nothing to do with the weather. Let’s look at some January developments of special interest to tech entrepreneurs.
The taxman cometh
Beginning January 1, tech entrepreneurs got hit with a tax increase. More precisely, tech entrepreneurs commonly defer all or part of their compensation and those deferrals will now be taxed.
Yes, you’ll now be taxed on bookkeeping entries that you may never get paid. In fact, if you don’t give the federales their pound of your flesh, you could also face interest and surcharge penalties for not paying taxes on that income you’re not really receiving.
What’s an entrepreneur to do? First, call your accountant. Next, call your congressman.
What are we, chopped liver?
Midwestern tech entrepreneurs have long lived with their second-class fund-raising status compared to entrepreneurs on the coasts. On January 6, the Boston Globe noted the emergence of more global competition for investor dollars by reporting the first investment in an Indian technology company by a Boston venture capital firm:
Many think it could signal the start of a new financing wave for entrepreneurs in India and eventually China.
[One VC said]: “My personal opinion is that all VCs need to look at these countries. … We frankly believe there are a lot of smart people [who] don’t live in Boston or San Francisco. It’s highly likely that, in the next 18 months, we’ll do multiple deals in India and China.”
Notice the part of this country in which he didn’t mention finding smart people.
Succeeding at failure
Throughout January, business news pages were filled with stories about TiVo (the phenomenally successful digital video recorder company). These stories invariably note that TiVo pioneered DVR technology, has by far the best technology, has permanently changed the TV-viewing habits of millions of devotees and still commands a 50 percent market share.
Still, these stories invariably go on to say that TiVo might become Silicon Valley’s “most successful failure” because it is besieged by competitors, has lost $600 million in five years, is about to be dumped by its biggest distributor (DirecTV) and just lost its CEO and president.
Now tell me again about your defensible proprietary position.
Who can you trust?
On January 23, Johnny Carson died. He got his start on a TV quiz show titled “Who Can You Trust?” (which should have been the headline of a San Jose Mercury News story about the competition between companies focused on “wikis,” collaborative Web sites meant to be easy for a group of people to edit).
After extolling the impressive entrepreneurial achievements of one Ross Mayfield (who pioneered the technology), there was this:
Last year, word emerged that Joe Kraus – who had also taken an early peek at Socialtext while considering whether to invest – decided to launch a competing wiki company. … Later, he announced $5.2 million from big-name venture capital firms (perhaps all the better to lure away employees). A hot rivalry has ensued.
In the California of John Wayne, Clint Eastwood and Hopalong Cassidy, a faux investor who instead steals ideas and employees would have been branded a low-down, no-good rattlesnake. In today’s California, he raises venture capital.
Valuation 101
On January 25, several reports surfaced about partners at two prominent Silicon Valley VC firms being sued for allegedly deceiving founders of a start-up company by withholding certain critical information and cheating them out of millions of dollars.
In 2002, the founders agreed to sell their interests in the company but claim they were not told that there was a pending deal with Google that would increase 2003 net income by 1,400 percent over 2002. One thing is for certain: some trial lawyer is going to get rich.
The Big (Double) Dipper
On January 27, the LA Times reported on Buy.com founder Scott Blum.
Blum brought his company to an IPO in 2000 at $13 per share, bought it back in 2001 at 17 cents per share and now expects to raise $86 million in new funding because online shopping is hot again. Buy.com has never earned a profit and has lost more than $400 million since Blum founded it in 1997.
Yes, you have reason to be depressed, but as a public service, this column reminds you that the National Center for Health Statistics says suicides do not increase in winter.
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.