The Crazy Times Are Back In Startup Land

Any doubt that the recession was over in the tech community were settled today when two big rounds were announced: $75 million for Ustream and $50 million for Glam Media.

By themselves the rounds might not seem exceptional, until you consider that Glam had already raised $125 million previously, with its last round of $10 million coming less than 12 months ago. The $50 million is a bit more modest for Ustream, who had previously raised $12.8 million.

How much money is enough?

Ustream has the more difficult business model of the two with bandwidth costs, copyright and UGC management complicating things. They’re doing a good job, and will probably use the money well.

Glam Media though is the complete opposite to Ustream. Proven business model in ads; sure, the spending dropped during the recession, but ads were still there, and given they’ve dropped guaranteed payments for sites they sell ads for, they shouldn’t be losing money selling ads. They’ve also been running the business for over six years (and over four years since officially launching to the public in September 05.) How the f&*k to do you burn $125 million in that time selling ads? More importantly, what sort of insane person thinks putting in another $50 million is going to magically turn around the fortunes of a company that has failed for the last 5 years?

Gla isn’t some highly complicated, ground breaking tech startup that takes time to get the bugs sorted and build an audience, it’s a company that primarily sells ads for other sites.

They’re also not interested in business, or likewise they didn’t blow the $125 million on secretaries: twice in the last two years I’ve contacted them as a potential ad partner, and twice I’ve never had one response, despite speaking to most of their competitors directly. I’m not suggesting that we are a perfect example, but I’ve been told by others that they’ve experienced similar silence from Glam, while most competitors are keen for new sites to represent.

Here’s a hint to Glam: if you don’t have enough quality inventory, you’re not going to attract enough quality ad placements. Even if you’re not interested in increasing the sites you rep at a given time, you should always be considering applications because among the morass of blogs might be a diamond waiting to find a home. The common courtesy of a thanks or no thanks doesn’t take a new round of $50 million to afford.

The funniest thing: they’re talking about an IPO this year. I’d rather go to a casino, the odds are better, and besides, I’d actually know what I was doing.