February 09, 2006

FON-ey business, or The A-list profit algorithm?

Wall Street Journal: Blog Buzz on High-Tech Start-Ups Causes Some Static (via Infectious Greed):

But the tiny company [FON] also got publicity from another source: influential commentators on the Internet who write blogs -- including some who may be compensated in the future for advising FON about its business.


The avalanche of blogging about FON, much of it from people now tied to the four-month-old company, highlights the rising influence of blogs in shaping opinions about tech start-ups, particularly in Silicon Valley. It also reveals the possible conflicts of interest such complicated relationships can dredge up.

Earlier, I had posted a comment about this on one A-lister's blog (slightly expanded):

Regarding: "I joined the advisory board without asking whether there would be any financial reward. (The answer, it later turned out, was that there might be, depending on how the company did in the marketplace.)"

Thanks for sharing that, I found it the most interesting part of the message (otherwise, another WiFi mesh-net, ho-hum).

I'm getting fascinated by how the whole A-list/start-up ecosystem functions. As far as I can make out, it goes like this:

The A-listers travel the conference circuit, accumulating attention. They may have a small foundation grant to live on, like a salesman's base salary. But if so, it's not a huge amount, essentially covering the core expenses of being an A-lister (basic living, airfare, transport, hotels).

The start-up gives the A-lister options, and a small measure of status. In return, the A-lister gives the company a measure of credibility, and some of the accumulated attention.

If the company crashes and burns, as most do, well, the attention and status exchanged was mutually beneficial.

If the company hits big, as happens, but rarely, then it's payday all around.

Have I got it right?

No criticism *at all* implied in this - purely my trying to analyze the mechanics of how it all works, and figure out how dangerous it is for me to be around that game.

Per the WSJ article validating this issue now, it seems to work like a personal version of a venture capital fund. The A-lister has a portfolio of "advisory board memberships", most of which aren't profitable. The few which are profitable, though, make the money for the whole endeavor.

Note this is an expensive game to play, since you basically have to spend all your time pitching and attention-cultivating. And be "connected", to get in on the hot deals (one of my big problems in this game is that I'm just barely "connected" enough to sometimes hear about the hot deals after the fact, but so much baggage that I'll never, ever, get one).

Once again though: Meet the new boss, same as the old boss.

By Seth Finkelstein | posted in cyberblather | on February 09, 2006 10:29 AM (Infothought permalink)
Seth Finkelstein's Infothought blog (Wikipedia, Google, censorware, and an inside view of net-politics) - Syndicate site (subscribe, RSS)

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Posted by: Karl at February 9, 2006 11:23 AM

My measured, reasonable take *cough*, from about 14 months ago. Still gets googlenauts by the bucketload surfing in on unsavory keywords, thanks to the juxtaposition of naughty words.

Posted by: stavrosthewonderchicken at February 9, 2006 10:57 PM

Superficially, your take is valid, but the whole circle-jerk thing doesn't work very well if the 'a-lister' is doing it for mercenary motivations (unless, of course, they are able to fake sincerity. Then they've got it made).

Posted by: Michael at February 11, 2006 06:14 PM