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DealBook: Moving From Wall Street to the Tech Sector Proves Tricky

January 25, 2013 by Leave a Comment

Olga Vidisheva, left, chief of Shoptiques, and Chelsea Sun, the company's director.Hiroko Masuike/The New York TimesOlga Vidisheva, left, chief of Shoptiques, and Chelsea Sun, the company’s director.

When Vinicius Vacanti set out to make a pitch for a local deals start-up to investors, he figured he understood the process given his four years on Wall Street.

But minutes into his first meeting with a venture capitalist, Mr. Vacanti realized he would be rejected. The investor quickly pointed out the flaws, including the site’s lack of users. As Mr. Vacanti rode the bus back to New York from Boston, he considered scrapping the project and starting over.

“The skills you build on Wall Street don’t correlate to a start-up,” said Mr. Vacanti, 31, a founder of the daily deal aggregator Yipit, who previously worked at the private equity firms Blackstone Group and the Quadrangle Group. While some of those skills are useful, he said, “a couple of those are actually bad.”

As more financiers jump to the technology sector, some are finding that their background, typically considered an asset in the corporate world, can be a liability. Some do not know how to write computer code. Others are ill-prepared for the penny-pinching and frustration of start-up life. In short, they have trouble persuading the Silicon Valley establishment that they have what it takes to nurture a young company.

“We start a little skeptical of someone from a finance background,” said Eric Paley of Founder Collective, the investor who declined to back Mr. Vacanti’s original idea. “It’s the lack of having to create something for a customer, find the market opportunity and persevere through it with very, very low economics.”

The challenge has become particularly acute as big investors become more discerning with their money. While the technology scene has boomed in recent years, venture capitalists are showing signs of pulling back, especially after the struggles of Facebook, Groupon, Zynga and other former Internet darlings.

Last year, venture capitalists invested $1.78 billion in 302 deals in New York City. That compares with $2.27 billion in 317 deals in 2011, according to PricewaterhouseCoopers and the National Venture Capital Association, which use Thomson Reuters data.

“There’s definitely fewer dollars available” for young companies that need an additional round of financing, said David Pakman, a New York-based partner at the venture capital firm Venrock. “Capital is tight and getting tighter.”

For young Wall Street professionals contemplating a bleak job market, the lure of working at a start-up — with its cachet and prospects for riches — can be powerful. But many financiers are finding it difficult to make the switch.

When Evan Rose left his job at the hedge fund Dynamic Capital Management to start an online night life service, he did not know how to write code. At first, he tried to outsource the programming for the site to Web developers in India. But he had to throw out the final product. “It was pretty much gobbledygook,” said Mr. Rose, 25.

After that, he started from scratch, learning to write code using Google and online forums. It took him a year to create the finished product.

When he eventually took the project to investors, he was excited about the idea, which he called an “OpenTable for night life.” But the site, NiteFly, had a chilly reception. “Although to him it was a novel concept, we’d heard it before,” said Kyle Widrick, a venture capitalist at Burch Creative Capital who heard the pitch.

To be taken seriously, Mr. Rose realized that he would need a deeper knowledge of the intended industry. So he abandoned NiteFly to work on a different start-up, eCruit, which aims to connect corporate recruiters to college students through online video conferences.

He worked with a human resources employee at a big bank, who used his contacts to attract recruiters to the service. With a seed investment from Ted Dintersmith, a partner emeritus at Charles River Ventures, eCruit is now planning its inaugural recruiting sessions for this year.

Some first-time entrepreneurs turn to mentorship programs like Y Combinator and TechStars to gain experience and tap into sources of financing.

Olga Vidisheva, the founder of the online fashion company Shoptiques, had a classic Wall Street background when she entered Y Combinator, having spent two years at Goldman Sachs before going to Harvard Business School. Two of her earliest investors were friends from Goldman, and her first employee came from the buyout firm Providence Equity Partners.

With no technical background, Ms. Vidisheva, 27, used the opportunity at Y Combinator to find a programmer. After the three-month-long program, she also ended up raising $2 million from prominent venture capital firms like Andreessen Horowitz, Greylock Partners and Benchmark Capital.

Only a handful of “Wall Street refugees” have gone through Y Combinator, said Paul Graham, a founder of the incubator, adding that the number of applicants from finance has been growing in the last couple of years. “What we like about them is they tend to be pretty fierce,” Mr. Graham said. “You can point them at any problem, and if they don’t know how to solve it, they’ll figure out how to solve it and then solve it.”

Others are trying to bring their Wall Street experience to the Web, rather than entering a completely new field.

Nick Sedlet, a former quantitative strategist at Goldman Sachs, and Elli Sharef, a former management consultant at McKinsey Company, started HireArt, a site that connects qualified job seekers with employers. They modeled the program on the in-depth interview process at Goldman and McKinsey, which require applicants to tackle math and logic problems. Prospective employees might be asked to design a marketing campaign for a fitness start-up, or calculate the amount of capital that a chief executive should invest in new property.

“McKinsey and Goldman are two institutions that have really thought about how to assess people,” said Mr. Sedlet, 27. “We saw a very easy way to make that methodology available online.”

Keenly aware of the challenges of start-up life, Mr. Vacanti, of Yipit, now writes a blog chronicling his experiences and sometimes speaks at gatherings for young professionals considering a similar path. After the disappointing meeting in 2010, Mr. Vacanti took the investor’s advice to heart and decided to “pivot,” in tech parlance, moving from offering local discounts to aggregating daily deals from sites like Groupon. In 2010, Yipit raised $1.3 million from investors; in 2011, it raised $6 million.

Last March, in response to one of Mr. Vacanti’s blog posts, Mr. Paley commented on their meeting. “Glad I could help,” Mr. Paley wrote on Twitter. “Should have invested in the pivot!”

Article source: http://dealbook.nytimes.com/2013/01/24/moving-from-wall-street-to-the-tech-sector-proves-tricky/?partner=rss&emc=rss

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Bits Blog: Tim Cook Apologizes for Apple’s Maps

September 28, 2012 by Leave a Comment

Timothy D. Cook, Apple's chief executive, at the introduction of the iPhone 5.Eric Risberg/Associated Press Timothy D. Cook, Apple’s chief executive, at the introduction of the iPhone 5.

After more than a week of complaints and jokes about Apple’s new mapping service, the company’s chief executive apologized to customers on Friday for the frustration it has caused.

In a letter posted on Apple’s Web site, Timothy D. Cook said he was “extremely sorry” for the anguish caused when the company replaced Google’s maps with its own, acknowledging that the company’s new Maps app did not live up to its standards.

He said that 100 million people were already using the maps, and that the more who used it, the better the service would get. In the meantime, while Apple fixes its maps, he suggested that customers try alternatives available for download in the App Store or on the Web — including Google’s.

In previous versions of iOS, Apple’s mobile operating system, the Maps app was made by Apple and powered by Google’s maps service. But Google, with its Android software for phones, has come to be more of a competitor to Apple than a partner. In iOS 6, the latest version released last week, Apple replaced the old app with a new version that uses mapping data collected or purchased by Apple itself.

Early reactions to Apple’s new maps app were mixed: Some customers said they enjoyed the visuals and new features in the software, but many complained about issues like location searches failing or the maps bringing up incorrect results.

“This is just simply an area where companies like Google and Nokia have had a tremendous head start,” said Ross Rubin, a principal analyst with Reticle Research. “Clearly Apple did not prepare from day one to build its own mapping application.”

Eric E. Schmidt, Google’s chairman, told reporters in Tokyo this week that Apple should have stuck with Google’s maps. Google is seeking to finish a new maps app for Apple’s iOS devices by the end of the year, according to people involved with the effort, who declined to be named because of the nature of their work.

Though Apple has come under criticism for product problems in the past, apologies from the company are rare. When some customers discovered the iPhone 4’s reception could be weakened if the phone was held a certain way, Steve Jobs held a press conference and said he would offer free cases to affected customers, avoiding an explicit apology.

Earlier, when Apple customers complained about the price of the first iPhone dropping so quickly after its introduction, Mr. Jobs penned an open letter with an apology and offered a $100 store credit for those who bought the iPhone for the higher price.

Mr. Cook’s full letter follows:

To our customers,

At Apple, we strive to make world-class products that deliver the best experience possible to our customers. With the launch of our new Maps last week, we fell short on this commitment. We are extremely sorry for the frustration this has caused our customers and we are doing everything we can to make Maps better.

We launched Maps initially with the first version of iOS. As time progressed, we wanted to provide our customers with even better Maps including features such as turn-by-turn directions, voice integration, Flyover and vector-based maps. In order to do this, we had to create a new version of Maps from the ground up.

There are already more than 100 million iOS devices using the new Apple Maps, with more and more joining us every day. In just over a week, iOS users with the new Maps have already searched for nearly half a billion locations. The more our customers use our Maps the better it will get and we greatly appreciate all of the feedback we have received from you.

While we’re improving Maps, you can try alternatives by downloading map apps from the App Store like Bing, MapQuest and Waze, or use Google or Nokia maps by going to their websites and creating an icon on your home screen to their web app.

Everything we do at Apple is aimed at making our products the best in the world. We know that you expect that from us, and we will keep working non-stop until Maps lives up to the same incredibly high standard.

Tim Cook

Apple’s CEO

Article source: http://bits.blogs.nytimes.com/2012/09/28/tim-cook-maps/?partner=rss&emc=rss

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Bucks Blog: Resolution: Better Personal (and Financial) Organization

January 4, 2012 by Leave a Comment

This week on Bucks, the whole Your Money gang is laying out their financial resolutions for 2012. On Tuesday, Ann Carrns wrote about the paper savings bonds in her closet. I’ve got two things on my mind.

First, there’s the money value of my time. In 2012, I want to waste less time looking for things. For whatever reason, few things cause me more anxiety than having to storm around my apartment or cube at work trying to find my wallet or a story file from six months ago. It causes my blood to feel as if it’s literally boiling.

The waste is itself nearly quantifiable. All of that time (and it happens many times each week) I spend looking for something could be put toward some other work project that would allow me to be a better performer, with a higher ceiling on my compensation. Or I could spend it instead with my wife or my child, which is worth a lot, too.

But disorganization also makes me mad at myself, for not being the kind of person who knows where everything is all the time. That frustration, alas, often carries over into the next activity, and it’s distracting. I should lighten up, I know, but it would probably be easier just to not lose stuff in the first place.

So now my keys and wallet and headphones and gym bag all have a specific place. The lock has a specific place in the gym bag, too. And (thanks, admittedly, to the exhortations of the New York Times Business section’s chief administrative officer) I now have a much cleaner work area. Progress, already.

As for actual dollars, I’ve finally set up subaccounts at the online savings bank ING Direct. There are about 10 of them, one for every spending item that my household doesn’t spend money on regularly each month: out-of-town travel, car repairs, taxes from freelance income, camp for the child.

In February, I plan to automate things so that the ING accounts pull the budgeted amount of money over from our main checking account each month. Then, when we need it, we can manually put it back to pay bills. That way, we know the money is gone and isn’t available for day-to-day needs — but it’s there once we do need it many months from now.

One wild card here: Capital One, ING Direct’s new owner, could decide it needs to “enhance” its new acquisition and get rid of the subaccounts or make them less useful. So here’s a resolution I hope the data-driven executives there take up for themselves:

Do not mess with our ING subaccounts.

Article source: http://feeds.nytimes.com/click.phdo?i=c9b635a33f1101a577e6452eb22e8db7

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U.S. Adds a Modest 80,000 Jobs; Rate Drops to 9%

November 5, 2011 by Leave a Comment

That was the reaction on Friday to the government report that the nation’s employers added just 80,000 jobs in October. While the pace was not exactly robust, it was better than over this summer, when monthly hiring fell to 20,000. Upward revisions in the report for September and August gains contributed to the sense that the economic picture was a little less bleak.

“The underlying momentum of the economy is better now than we thought it was a few months ago,” said Augustine Faucher, the director of macroeconomics at Moody’s Analytics. “We’re doing O.K., even if we’re not doing great. The odds of a double-dip recession are lower, at least.”

But even without a second recession, frustration over the sluggish recovery could impede President Obama’s re-election chances.

The administration is still haunted by its overly optimistic predictions, made in January 2009, of what the economy would look like once Congress passed a $787 billion stimulus package. White House economics advisers predicted that the stimulus would bring unemployment down to 6 percent by the end of this year and close to 5 percent by the end of 2012. Instead, unemployment dipped slightly to 9 percent in October from 9.1 percent, about where it has been all year long. The Federal Reserve is projecting about 8.6 percent for next year.

While the Congressional Budget Office and other nonpartisan organizations have said, again and again, that the recession and recovery would have been even worse without government intervention, Republican presidential contenders argue that today’s weak economy proves that fiscal stimulus cannot create jobs.

The Obama administration has taken the opposite tack, arguing that the economy needs more, not less, government assistance.

“What I take from this report is that the economy is moving in the right direction, but it’s not moving there fast enough, and this is why the administration proposed the American Jobs Act,” said Alan B. Krueger, chairman of the Council of Economic Advisers.

The job gains in October were just barely enough to keep up with population growth, so they did not substantially reduce the backlog of 14 million unemployed workers. As a result, the unemployment rate is still about double what it was in the year before the recession began, 4.6 percent.

“It will take years for the U.S. job market to return to its prerecession glory,” said Jason Schenker, president of Prestige Economics.

Economists and politicians typically view the monthly jobs number as a crucial indicator of the nation’s economic health. But with so many potential game changers on the horizon in Europe and at home, the latest report may say little about what Americans should expect.

The fate of Greece has been up in the air for about a year and a half, and this week the political wrangling has been particularly tumultuous in Athens. If the European bailout deal falls through for Greece, the effects could spread to other heavily indebted countries like Italy and perhaps set off another global financial crisis.

“The outlook ahead remains for modest growth, but risks remain to the downside without a convincing resolution of the euro zone crisis, which is conspicuously absent at present,” said Nigel Gault, chief United States economist for IHS Global Insight.

Mitigating these worries, however, is the case of MF Global, an American financial services company that filed for bankruptcy this week after making bad investments in European markets. The bankruptcy of the relatively small firm was taken in stride.

“We had a primary dealer file for bankruptcy this week without seeing any of the waves from 2008 related to Bear Stearns and Lehman Brothers,” said John Ryding, the chief economist at RDQ Economics, referring to two bigger financial firms whose collapses helped send global financial markets into a tailspin.

Another potential wild card is Congress’s panel on deficit reductions, the so-called supercommittee. Talks have stalled, and the committee has less than three weeks before an alternative (and more draconian) plan might kick in.

If government spending cuts are put into effect too quickly, they could be a severe drag on the economy and even derail the fragile recovery, economists have said. Governments at various levels have been steadily paring back, and have laid off, on net, 323,000 workers in the last year.

There are other domestic policy unknowns, too. Congress has not yet decided whether to renew a 2 percent payroll tax cut and federal extensions of unemployment benefits — both set to expire in January. Many economists support the measures.

Even if shocks like these do not materialize, the economic outlook is still troubling.

Among the biggest challenges is the army of millions of Americans who have been out of work for months or even years.

The average time an unemployed worker has been pounding the pavement is unusually high, at 39.4 weeks, just shy of the all-time high of 40.5 weeks recorded in September. People who have been out of work for longer spells have significantly more trouble getting rehired, for complicated reasons, including stigma and the deterioration of skills.

“In interviews, they say they’re concerned that my base of skills has been antiquated because of this employment gap,” said Sarah Hoppe, 43, a former account manager in Toledo, Ohio, who was laid off in July 2009.

“I tell them I have a good mind and an infinite capacity to learn,” she said, but employers still pass her over. “It’s absolutely demoralizing.”

In addition to the upward revisions to previous job growth numbers, there were a few other positive signs in the latest jobs report.

Employment in temporary help services rose slightly. Employers often use temp workers before taking the plunge and hiring permanent staff.

Hourly earnings also rose 5 cents, after a gain of 6 cents in September.

The length of the average workweek, however, remained flat at 34.3 hours, where it has been for about a year. Companies usually work their existing employees harder before hiring additional workers, so the stagnant workweek is not a particularly good sign for job growth.

Article source: http://www.nytimes.com/2011/11/05/business/economy/us-added-80000-jobs-in-october.html?partner=rss&emc=rss

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