Kikabink News

There are two main schools of thought when it comes to whether or not you should build a business based on what you’re passionate about.

Some argue that if you pursue your passion the money will follow. Others say that you may not be able to build a sustainable or lucrative business based on your passion. You might be passionate about building things with toothpicks… but whether you can translate that into a business is another matter.

My view is this: just because you’re passionate about something doesn’t means you’ll be able to build a business around it.

HOWEVER you do need to be passionate about your business to be successful.

Depending on who you are, being passionate about the subject matter of your business may be optional. It’s not optional for me - I need to be passionate about what my business does in order to stay interested in it - but I’m well aware of successful business people who have nothing more than a passing interest in the products and services they sell.

What I don’t think is optional is a passion for your customers. Not if you’re going to start a business from scratch and build it into something GREAT. Equally, I don’t think being passionate about business itself is optional.

Unless you love the cut and thrust of building a business, it’s unlikely you’ll have the persistence, resilience or “opportunity radar” required to overcome the inevitable challenges and seize the opportunities that come your way.

Professional social network, LinkedIn plans to cut 36 of its 370 employees, which amounts to just under 10 percent of its workforce. Apparently, LinkedIn will reassign some of the employees, rather than let them go altogether.

LinkedIn isn’t running out of money - it recently closed a $22.7 million funding round, which in turn followed a $53 million venture capital injection in June. However, it’s presumably being cautious in light of the current economic environment and slow-down in online advertising growth.

Source: Jason Kincaid, “LinkedIn Cuts 10% Of Staff,” TechCrunch, November 5, 2008

United States President-elect Barack Obama spent $7.97 million on online advertising before November. The Obama campaign managers spent it on search engine marketing, ad networks, social networks, local TV sites, newspaper sites and even NBA.com.

Think that’s a lot of money? Well, let’s put it into perspective. Obama spent over half that budget, i.e. $4 million, on one 30 minute television commercial in October.

Google got nearly half of Obama’s online budget, with nearly $3.5 million going into Google search. Yahoo search got just $673,000 in October.

Source: Nicholas Carlson, “Obama’s Online Spend: Actually Tiny,” Silicon Alley Insider, November 6, 2008

Let this be a lesson to all of you who make millions online and then decide to start a hedge fund. Don’t take on too much debt!

Just ask PayPal founder Peter Thiel, whose hedge fund firm Clarium Capital Management LLC, has seen its Clarium LP fund incurring a 40 percent loss in the three months to October 2008.

Clarium’s approach has essentially been to borrow money in order to invest it. This can give investors huge returns when times are good… but when times aren’t so good, it can be disastrous. As at October 31, Clarium had $4.40 in borrowings for every $1 in equity capital. Apparently, the fund is still in good health, but investors are understandably becoming nervous…

Peter Thiel started Clarium after selling PayPal to EBay Inc. for $1.5 billion in 2002.

Source: Henry Blodget, “PayPal Founder Peter Thiel’s Hedge Fund Blows Up,” Silicon Alley Insider, November 6, 2008

According to TechCrunch, Facebook may become a victim of its own success. With a 118 percent in growth in unique million visitors - from 74 million unique visitors per month a year ago to 161 million uniques per month now (according to comScore) - the company is still not profitable. Which means it may need a substantial cash injection sooner rather than later to continue.

TechCrunch reports that with 750 employees and an estimated $10 million monthly payroll, along with $1 million per month for electricity, $500,000 per month for bandwidth, up to $2 million for each NetApp 3070 storage system it’s buying on a weekly basis, $15 million per year in office and data center rent payments, and $100 million earmarked for 50,000 servers… it all adds up to annual expenses of $200 million or more.

And while Facebook’s 2008 estimated revenue is $265 million, the company is still losing money at current revenues, with no assurance that revenue growth will meet or exceed the growth in costs.

Writes Michael Arrington:

“If revenues don’t grow substantially, the company’s runway of cash gets much shorter. 2008 revenues are likely $100 million less than the company anticipated a year ago. If the economic train really derails, Facebook could be in big trouble.”

If Facebook has spent most of the $500 million it has raised to date… and revenues don’t substantially increase… the company will need further funding. Which, according to Michael Arrington, it should grab as soon as possible.

Source: Michael Arrington, “Facebook May Be Growing Too Fast. And Hitting The Capital Markets Again”, TechCrunch, October 31, 2008