In his “Getting the UnParty Started” post, Mike Arrington announced that Seesmic, a company that raised $12 million with no business plan whatsoever, is laying off seven people–more than a third of the company.
And I’m not being unfair when I say they have no business model… that comes straight from the founder, Loic LeMuir, who commented on Mark Evans’ blog by saying that even though his traffic is growing, “It does not mean I have a business model.”
Are we supposed to believe this is environmental?
It’s not. This is the specific case of a company that lacks a business model, isn’t a new idea, and one that got overfunded. It got funded by Valley VCs? Really… you’re kidding me?
Let’s compare Seesmic with New York City-based Paltalk to show why we shouldn’t act like Seesmic’s layoffs are the End of Days… Sure, there’s definite trouble in the economy, but the extent to which people are telling that the sky is falling and the fact that “Silicon Valley woke up to the fact that something had changed,” as John Borthwick put it, “…is a distraction.”
Innovative new idea?
Hardly. If you narrow the definition of your space to microscopic levels, anything can seem new, but rather than think of Seesmic as the first embedded video comment platform (how big is that industry?), let’s just say that it’s generally in the business of creating video communities. That would make it about three and a half years late to the party, as Paltalk got its first round of funding back in 2004, comparied to late 2007 with Seesmic.
Business Model and Financing
Like Loic said, Seesmic has no business model, and yet they raised $12 million in less than a year. You can’t even say, unlike what Hulu seems to be doing, that you could slap advertising in there to generate revenue, because these are conversations. Who wants an ad for chilli’s right before a blog comment?
Paltalk, on the other hand, has been profitable for a couple of years on just a single round of $6 million in financing. Their users pay for advanced functionality–the freemium model. [Ed. Note: Per president and COO Joel Smernoff, Paltalk is now profitable on revenues of $19 million]
Built for a Mass Audience
Paltalk took something that people have been doing on the web for years–talking on IM and in chat rooms, and made it more interesting with video technology. It was clear that this was something that mainstream users were already interested in doing.
Seesmic on the other hand, built around asynchronous video commenting, doesn’t seem to be gaining traction at all–not surprising because commenting in general wasn’t something that was really that prevalent on most blogs. Plus, the audience of bloggers and blog commenters is much smaller than people who IM or chat.
Most posts get one or two comments, but you wouldn’t know that if the only blogs you read are A-listers. Disqus bucked that trend by making commenting easier and more responsive to the user–engaging listserv style discussions by e-mail to power blog comment conversation, but Seesmic makes leaving a comment more cumbersome
Most people encounter Seesmic on the blogs of A-listers–so it’s not surprising that A-lister Valley types are the ones who funded it. Paltalk, however, makes deals and works with media partners and groups that cater to the mainstream–like Opie and Anthony’s morning talk radio show. Have you ever sat in a random Paltalk chatroom? You hear people from all across the country and the world–not Web 2.0 blog pundits, but just regular “Joe Six Packs” talking about their lives. It’s really fascinating, actually.
I’m tired of the pundits and the VCs telling companies that the end of days is near, after those very same folks talked up and funded… over funded, rather, all of these companies that they’re now shaking their fingers at telling to cut out unnecessary spending and work on getting to profitability. Wasn’t that what they were supposed to be doing in the first place?? Why do any of these companies have extra money to spend anyway?
My company is talking about a $2 million round that takes us from 4 people to 8 people and our marketing plan takes us pounding the pavement to professional societies, alumni associations–i.e. the mainstream–solving a mainstream painpoint by helping people with their careers. It kind of makes me sick, actually, to see that so much of the capital in these overfunded, underfocused deals will go up in smoke, and unfortunately will lessen enthusiasm for solid ideas from conservative entrepreneurs with them in the cloud of uncertainty and fear that has now been cast.