The Tryon Street Journal

I was glad to read today about Microsoft’s willingness to…

1. Accept that they’re not the dominant player in many of today’s fastest-growing segments of tech, and
2. Hire and listen to outsiders with more entrepreneurial ideas of how to move the big elephant in the right direction.   

Granted, when you’re sitting on billions in the bank, I can understand why it’s hard to do this.  Not only is Microsoft bringing in fresh blood in product groups such as online advertising and Xbox, but their 2005 hire of Chris Liddellas CFO has proved a prudent move.  (I can personally vouch for Mr. Liddell.  When I was leaving Bill Gates’ house after the intern dinner just after Mr. Liddell was hired, I quizzed him about investment banking vs. corporate finance, as I was pondering my post-college path.  He was very helpful.) 

What Robert Guth’s WSJ articletells me is Microsoft is willing to adapt and change in this web 2.0 world we’re in.  This is music to my ears, because the precise reason I didn’t stay on after my summer in Redmond was the company’s couch-potato attitude toward the market.  It was apparent that they knew they had a cash cow in the OS and office suite segments, but weren’t willing to be pro-active at protecting that monopoly with innovation in those products.  On top of that, MS was coming in 2nd or worse in ancillary groups such as mobile and the web. 

But it sounds like Microsoft is now making wholesale changes in strategy, from the inside out (or in the case of hiring, outside in).  It’s going to be interesting to observe.  Here is one indication change is in the air:

Mr. McAndrews says Microsoft wants him to continue building an ad business much as he did before. Still, he says he wants input in the form of technology and other resources from Microsoft that aQuantive didn’t have on its own. They “don’t want to mess with that formula,” he says. “On the other hand, I want to mess with it some.”

Dennis Berman at WSJ thinks Facebook should raise another serious round of private equity or go public, but not sell the company.  He cites GeoCities’ downfall as an example after it was sold to Yahoo!. 

I disagree.

I think Mark Cuban would agree with me (by the way, his smartest move wasn’t selling the company to Yahoo!; it was essentially buying put options on his shares with some hedge fund, whereby he was able to continually sell Yahoo! shares at it’s ridiculous dot-com price all throughout the tech bust).  And so does Bo Peabody, who sold Tripod to Lycos for $58M, arguably the net’s first social networking site. 

If Mark Zuckerberg wants to maximize his cash, sell now.  Reports are Yahoo!’s Terry Semel offered $1B.  If that was in stock, Mark was smart to pass.  But if Facebook is now reportedly valued at $10B based on Microsoft’s investment, in the words of Cramer – SELL SELL SELL!  On the other hand, if Mark is captivated by controlling his empire, and cash isn’t king in his mind, then kudos for staying the course. 

Scott Thurm at the WSJ wrote a piece with some Q&A from a recent panel discussion in San Jose on how to manage innovation, and the challenges inherent in doing so.  This is one of those articles I have little to comment about – you just need to read it.  This goes without saying…

Managing innovation is one of the biggest challenges that companies face. They not only need to come up with new ideas, but they also need to foster a culture that encourages and rewards innovation. Otherwise, they risk being overtaken by their competitors.

And my favorite quote…

…there are many companies that just don’t have the awareness that they need to change. There are still people who say, “If it ain’t broke, don’t fix it.” And I don’t think these companies are in a good position to really change, because they’re happy with where they are. So you have to have a certain degree of discomfort in your business to be willing to make the changes that are necessary.

That’s the mantra of the new “rate my venture capitalist” site TheFunded.com.  Great idea.  The site force-ranks VC firms and lets entrepreneurs who have pitched to these guys spill the beans about their experience.  As everything I’m reading in Business 2.0 and elsewhere says, the tables have turned and now startups are being built with less funding and at better terms.  TheFunded.com is sort of the Zillow for cash-seeking entrepreneurs.  Give it a try… and can we get some more East coast VC’s on there please!

Read more about it in this WSJ article.