Saturday, May 26, 2012

Meet an entrepreneur that sleeps at the AOL office


Meet the tireless entrepreneur who squatted at AOL

19-year-old entrepreneur Eric Simons spent two months secretly living at AOL's Palo Alto, Calif. campus, sleeping …It was 6 a.m. when Eric Simons was jolted awake by the yelling.

After working until 4 a.m, the 19-year-old entrepreneur had finally passed out. A few hours of sleep would help with the day ahead.

But unlike most people working at AOL's Palo Alto, Calif., campus who were surely still hours from showing up at the sprawling complex, Simons was already there. He'd been living there for two months, hiding out at night on couches, eating the company's food, and exercising and showering in its gym. And now, with an angry security guard bellowing at him, it was all over.
Eric Simons (Credit: Eric Simons)
The story of how Simons, just two years removed from a Chicago high school, came to be living in AOL's Palo Alto campus could well become part of Silicon Valley lore, especially because it highlights the lengths some entrepreneurs will go to make their dreams a reality. And though stories abound these days of startup founders barely old enough to drink swimming in venture capital, far more have to get by on packaged noodles and the good will of friends with extra couches.

Chicago
You hear it all the time, but Simons, now 20, was a mediocre student with little interest in school. That changed one day when his high school chemistry teacher confronted him and demanded to know what she could do to get him interested.

"I was stumped," Simons writes on the About Us page of his startup, ClassConnect. "She didn't ask me to try harder, she didn't ask me to stay after for help or study more -- she asked me to figure out how she could grab my interest. No one had ever bothered to ask me that before. A few moments later I replied, 'let's get everyone working together on computers -- I'll even build the software for us to use.'" His life as an entrepreneur had begun.

He wanted to get straight into the thick of it, so after high school, and a short period crashing on couches with friends at the University of Illinois, Simons accepted a slot in the inaugural class of Imagine K12, a new Silicon Valley incubator focused entirely on education. His plan? Start a company that builds tools allowing teachers to create and discover lesson plans, and share them with students and teachers.

"Teachers around the U.S. and the world are asked to teach from a checklist," Simons said. "They're asked to teach the exact same thing...and they're all going and creating their own lessons. What we've built is almost a GitHub for teacher lessons. They can fork someone else's lesson plan and use that as a springboard."

Is it ironic that a bad student ended up launching a company that aims to revolutionize education? Simons doesn't think so. "It wasn't that I didn't like school," he said. "I didn't like [the way it was done]. I said, I'm going to take a crack at this. I'm young enough that I can take a crack at some crazy stuff. Ten years from now, maybe I can't be sleeping on people's couches."

Living at AOL
For Simons, "crazy stuff" meant moving to Silicon Valley and trying to get his fledgling company off the ground. But his initial idea wasn't quite working. Imagine K12 was a great place to get mentorship and learn how startups are built, but he and his ClassConnect partners had been given just $20,000 by the incubator, and after the four-month program ended, the money was gone. When his friends left to go back to college, Simons needed another solution.
 AOL's Palo Alto campus, as seen using Google Maps. (Credit: Screenshot by CNET)
Imagine K12 is hosted at AOL's Palo Alto campus, and everyone involved gets a building badge. As it turns out, Simons told CNET, the badges kept working, even after the program ended, giving him ongoing access, along with a face that had become familiar to others who worked there.

"I couldn't afford to live anywhere," Simons recalled. "I started living out of AOL's headquarters."

Contacted for comment, David Temkin, senior vice president of Mail and Mobile for AOL, told CNET, "It was always our intention to facilitate entrepreneurialism in the Palo Alto office -- we just didn't expect it to work so well."

For someone with neither money nor an aversion to sleeping on others' couches, the AOL building had plenty of allure. "They had a gym there with showers," Simons said. "I'd take a shower after work. I was like, 'I could totally work here...They have food upstairs, they have every drink on tap. This would be a sweet place to live.'"

Note that Simons said he would work there. After his four months in the incubator, he was used to toiling away at ClassConnect inside the building, and with other programs, from the Stanford-focused incubator StartX to AOL's own First Floor Labs also taking up space there, there was no shortage of non-AOL employees shuffling in and out all the time. But Simons was intent on launching his startup, so why not find a desk and pound away for 12 to 16 hours a day?

"There were so many people going in and out each day," he said. "They'd say, 'Oh, he just works, here, he's working late every night. Wow, what a hard worker.'"

$30 a month
Having spent several months legitimately working in the building, often quite late, Simons had noticed that although there were security guards with nightly rounds, there were at least three couches that seemed outside those patrols. Plus, they looked fairly comfortable. He claimed them.

This was his routine: He'd work until midnight or later, and then fall asleep around 2 a.m. on one of the couches. At 7 a.m. -- and no later than 8 a.m. so he'd be safely out of his field bed before anyone else arrived -- he'd wake up, go down to the gym for a workout and a shower, and then go back upstairs and scarf a breakfast of cereal and water or Coke. Then he'd work all day, finally waiting until everyone else in the building had gone home before returning to one of his three favored couches.

"I got a really good work ethic," he said, "and I got in shape, since I had to work out every morning."

But the real point was that he was spending next to nothing. The first month, he spent just $30, mainly on the occasional trip to McDonald's or for "random food expenditures when I got sick of eating ramen and cereal. I could have not spent a dollar, but I was going crazy."

Then, of course, there was Thanksgiving. That Thursday, to splurge, he grabbed dinner at a local Boston Market.

"It was a game I was playing," he said. "What is the minimum amount of money I can spend each day to stay alive. You do some crazy things."

Some of those crazy things included getting by with the barest of wardrobes. But because he had access to the building gym, he kept everything other than the clothes on his back and his computer there. "I only had maybe five to ten T-shirts, a pair of jeans, and a pair of shorts," he said, "so it all fit in one locker. [Plus] they had their own laundromat there, so I'd wash my clothes there."

Evasion
Simons could probably have crashed elsewhere, but he wanted to see how long he could make the AOL squatting work. Some friends knew what he was doing, and they thought it was funny. But no one helped him, other than a couple buddies who discussed strategies with him on how to evade security.

"Honestly (though), I didn't think they were going to catch on," Simons said. "I had no indicators that they even cared about that...After the first month, I was like, 'This has worked so far, but this probably isn't sustainable,' so I made sure my friends were OK with" me eventually crashing on their couches.

And then came that fateful morning with the 6 a.m. yelling. "One of the guys who manages the building came in at like 5 or 6 in the morning," Simons lamented, "and he scoured the entire place to find me. And he ripped me a new one. He was pissed that I was treating it like a dorm. Which was reasonable."

Ever the entrepreneur
Though the security guard was angry, he knew that Simons was part of Imagine K12. So no one called the police. He lost his badge, but he still had access to the incubator, and continues to go to the AOL building for meetings to this day. But he treads carefully. "When I'm there, I beeline for the Imagine K12 office," he said, "and when I'm done, I beeline straight for the door."

After moving out of the AOL building, things began looking up financially. Based on the strength of what he'd built for ClassConnect, especially after pivoting and focusing solely on letting teachers share lesson plans, Simons said he was able to score $50,000 in seed funding from Ulu Ventures and Silicon Valley VC Paul Sherer.

"I was aware" of Simons living at AOL, Clint Korver of Ulu Ventures told CNET. "Tenacity and commitment are key attributes of a great entrepreneur. Eric has these in spades as demonstrated by his willingness to do whatever it takes to get his company off the ground."

Now, Simons said, he's looking to raise an additional $500,000.

But one thing the initial $50,000 got for him is a rental house in Palo Alto. It's also made it possible for him to hire an engineer and a couple of interns for ClassConnect, all of whom will share the new pad.

But being the consummate entrepreneur, he decided to use the house to raise extra cash. One of the bedrooms has two bunk beds, so Simons turned the place into a hacker house by renting them out on Airbnb, and trying to make a couple grand a month to help with the rent.

So is Simons just a kid with a particularly honed entrepreneurial spirit?

"Yeah, save money whenever possible, and use all the resources you can," he said. "And don't die. That's basically my motto."

Update 9:31 a.m. PT: This story has been updated with a response from AOL.

Friday, May 25, 2012

The real company you should invest in other then facebook


How Big Will Alibaba Group Become? Over $150 Billion by 2016

Jack Ma‘s Alibaba Group is an extremely powerful force of e-commerce in China.  It’s really like the combination of Amazon (AMZN) and eBay (EBAY) in China today.
Jack Ma, Founder of Alibaba Group
Jack Ma, Founder of Alibaba Group (Photo credit: Wikipedia)
Recently, consultants estimated that 60% of the packages on the road today in China are deliveries related to the popular Taobao service, which is of course run by Alibaba Group.
Alibaba has been in the news this week becauseYahoo! (YHOO) is selling half its 40% stake in the company in the next few months.  Yahoo! bought the stake for $1 billion in 2005.  It’s now worth $14 billion, meaning that the parties agree that Alibaba Group is worth at least $35  billion.
That’s pretty amazing, except it’s nothing compared to how much I expect Alibaba will grow in the coming years.  I believe that, if Alibaba were to IPO today, it would be worth more than either Tencent or Baidu(BIDU), the two biggest Chinese Internet companies today by market capitalization. Morever, by 2016, our estimates are that Alibaba will be worth more than $150 billion.  Here’s why below…
Yahoo reports Alibaba’s revenues and net income on a one-quarter delayed fashion in their 10-Ks and Qs.  We know that Alibaba did $2.8 billion in revenues in 2011 with 67% gross margins and $547 million in net income.  This was a big jump compared to 2010 and in line (percentage wise) with growth seen at Baidu and Facebook.
Chinese research firm iResearch has done a good job projecting the growth of e-commerce and payments in China over the last several years.  In fact, we’ve gone back and cross-checked their projections from several years ago and found that they did a very accurate job in predicting how the entire market actually developed.  Therefore, it’s easy to put some confidence in their current projections and the expected growth in the next five years.
What that suggests to me – by doing a little math and projections into the future – is that Alibaba will do the following in revenues and net income this calendar year:
Q1: $860 million in revenue and $129 million in net income
Q2: $1,106 million in revenue and $243 million in net income
Q3: $1,187 million in revenue and $249 million in net income
Q4: $1,790 million in revenue and $501 million in net income
For the year 2012, Alibaba should do $4.9 billion in revenue and $1.1 billion in net income.
Slap an 11x price-to-revenue multiple on that and Alibaba is worth $55 billion today.  That could even be a little conservative, given that Baidu trades at a price-to-sales multiple of closer to 18x, while Tencent’s ratio is 12x.
Projecting ahead.  By 2016, it looks like Taobao and Tmall could do $16 billion in revenues.  Alipay could be doing $4.6 billion.  The old Alibaba.com looks on track to do almost $2 billion.
With proper price-to-sales ratios on each – including a more conservative 9x for Taobao – you get over a $150 billion market capitalization for Alibaba Group.
So, given all that, why would Yahoo! sell its Alibaba stake?  Wouldn’t the optimal move be to hang on to the entire stake?
Well, here is where we move from a theoretical discussion of optimizing full economic value to a practical discussion of maximizing full economic value.
It’s clear that neither Jack Ma nor the Chinese government were comfortable with the fact that potentially the largest Chinese Internet company was majority owned by Americans and Japanese.  They both wanted this changed prior to an IPO.  As long as it didn’t happen, there would be no IPO.
I think a deal had to be struck and that Yahoo!’s Tim Morse and Mike Callahan did a good job finding a win-win agreement that was good for both parties.
Yahoo! will sell 20% now and generate at least $4.2 billion after-tax.  Alibaba will likely close the deal within a few weeks, as it was reported overnight they are close to raising over $2 billion in financing from China Investment Corporation.
Yahoo! will sell another 10% at the time of the Alibaba IPO.  We don’t know when that will be, although I’ve heard rumors it will happen before June 2013.  If Alibaba’s worth $60 billion by then (which seems realistic), Yahoo! will gross $6 billion from that sale.
The final 10% of Alibaba, Yahoo is free to hold indefinitely.  If they hold until 2016, that last tranche of the stake could gross them an additional $15 billion.
Meantime, Jack gets his stake back.
If US investors don’t know much about Alibaba Group yet, they will in the coming years.

Aftermath of the facebook Hype


RELATED QUOTES

SymbolPriceChange
FB31.90-1.13
ZNGA6.58-0.22
NDAQ22.140.34
MS13.3250.01
ETFC8.73-0.03
Fantasy Finance
Ryan Cefalu, who lives with his wife and two kids in Baton Rouge, Louisiana, saw in Facebook Inc.'s (FB) much-anticipated initial public offering a chance to buffer his retirement fund. His expectations fizzled along with the stock within the first minutes of trading.
"It's disheartening to know that things get over-hyped," Cefalu, a 34-year-old data-systems manager who spent about $4,000 on the stock, said in an interview. "That's about a 12th of my annual income -- so a month's salary. I'm trying to do an on-my-own retirement kind of thing."
Facebook, a site used by 901 million people worldwide, allocated more than 25 percent of shares to retail investors, said two people familiar with the offering who asked not to be identified because the process was confidential. That means the value of stock bought by that group for $38 in the IPO has dropped by at least $630 million in total, based on the closing price of $32 yesterday and assuming investors held onto the stock.

[Related: Facebook IPO News]
While asset managers and hedge funds got to buy the stock in private trading years before the IPO and investment banks made money in the offering, small-time investors had to wait until last week's IPO for a piece of the action. The outcome: After Facebook and its underwriters misjudged demand in pricing the IPO and glitches on the Nasdaq hampered trading on the first day, the world's largest social-network website lost 18 percent in three days. The stock is still about 16 percent under its $38 IPO price after paring some losses yesterday.

‘Should I Bail?'
Facebook, the biggest technology IPO in history, turned into a quagmire of blame. Buyers of the stock sued the company, Nasdaq OMX Group Inc. and the underwriters, claiming they were misled. The U.S. Securities and Exchange Commission and the brokerage industry's watchdog both said they may review the offering, and the scrutiny prompted Morgan Stanley, the lead underwriter, to defend its handling of the IPO in a statement.
"I thought it would be fun to get in on the initial frenzy," said Linda Lantz, an online marketer in Granite Bay, California, who bought 100 shares. "Now it makes me think ‘Oh god, should I bail or is it going to come back?'"
For Cefalu, whose children are age 12 and 1, the first-day glitches meant more than a bad day of trading: they made him buy twice as many shares as he intended after an order he canceled went through hours later, he said. With shares of Zynga Inc. slumping along with Facebook, he estimates he lost a combined $2,250 as a result of the Facebook debut debacle.

Technical Problems
Michael McClafferty, a freshman finance major at Michigan State University, saw his "first big investment" turn into a $3,000 loss when he sold the shares at $35.
"I didn't want to lose more," McClafferty said. "I didn't know what to do."
The 19 year-old student estimates he spent $8,000 more than he wanted to while repeating orders that wouldn't go through on the first day, and failing to cancel them because of the technical problems.
"I didn't know what happened," he said. "Then I was like, ‘they should be able to do something about it.' They messed up pretty big from what I see, and it hurt more people than just me."

Retail Investors
On its debut, the Menlo Park, California-based website jumped to $45 at the start of trading, which was delayed 30 minutes, before ending the day up 0.6 percent at $38.23. It paled in contrast with Google Inc.'s 18 percent jump in its 2004 initial public offering, Visa Inc.'s 28 percent gain in 2008 and LinkedIn Corp.'s 109 percent surge last May.
"The reaction of the retail investor is ‘Wow, what a flop,'" Jay Pestrichelli, co-founder of the Omaha, Nebraska- based investment adviser Zega Financial, said in an interview.
Larry Yu, a spokesman for Facebook, declined to comment.
Facebook increased the number of shares sold and the price range days before the IPO, raising $16 billion and valuing the company at $104.2 billion.
Pat Brogan, a Yahoo! Inc. manager who trades on sites run by E*Trade Financial Corp. (ETFC) and Fidelity Brokerage in her spare time, called the experience of buying Facebook stock the "biggest fiasco" in her 30 years of day trading.
"They flooded the market with so many shares," Brogan said. "I'm actually going to dump them if they get back to $38."

Tuesday, May 15, 2012

Learn the 5 Secret Habits of Wealthy Americans


5 Secret Habits of Wealthy Americans


When you’re rich, you can cruise through life at a luxurious speed filled with fancy cars, designer clothes and caviar. But beneath the surface, becoming wealthy and staying wealthy involves hard work, an appetite for risk and a certain mindset that’s not always obvious. Here are some of the secret habits of wealthy people.

1. Bank on Your Street Smarts
“Making money has little to do with logic,” says real estate mogul, author and television star Barbara Corcoran. “It has more to do with trusting your gut.”

In an interview at her Upper East Side Manhattan office, Corcoran reflected on her struggling days in the classroom. “Often I think a prerequisite of making a ton of money is not being smart in school. The cutup in the classroom is often the guy with the big idea who makes a truckload of money.” Despite scoring Ds in high school and college, Corcoran utilized her street smarts and ability to connect with and judge those around her to ultimately grow and sell her Manhattan firm for $66 million in 2001. Today, she is the resident real estate contributor to NBC’s Today show and the sole female investor on ABC’s reality hit Shark Tank, now in its third season.

“You know what’s great about being a dunce in school? You have six-hour days to sit around and think of all kinds of things,” she says. “You get practice at imagination.”

In fact, according to Thomas Stanley’s book The Millionaire Mind, when asked how their high school teachers would have evaluated them, only 11 percent of millionaires said “most intellectually gifted” and just 10 percent  said “highest grade point average.”

2. Identify and Act on Opportunities
When author Ryan D’Agostino was researching his book Rich Like Them, he knocked on nearly 500 doors to the biggest houses in America’s richest neighborhoods, asking the owners inside: what’s your secret? For one, he discovered, the millionaire mind never stops stirring.

“I spoke with a lot of rich people and one habit that I heard more than once was always keep your eye open for that million dollar idea,” says D’Agostino. “I met a travel agent who was once helicopter skiing in western Canada. He wondered what happens to all the helicopters and lodges in the off-season, and it turned out no one was using them. So he set up this whole luxury travel side business where he would take people out in the summer, fly them up to look at glaciers and mountaintops. He made a ton of money doing it.”

Of course, it’s enough to simply have an idea, D’Agostino continues. “The difference was, he acted on it.”

3. Enjoy Your Money
While saving is a key characteristic of some wealthy Americans as they build and grow their riches, D’Agostino says many millionaires he interviewed had a sort of 50/50 rule when it came to managing windfalls of money. “I met this really interesting guy in Scottsdale, Arizona who ran a successful construction company and he told me that whenever he came into any money he didn’t know he was going to have, even if it was just a few hundred dollars, he would put half away and spend the rest on something fun like a vacation for his kids or something nice for his wife,” he says. “He’d say, ‘what’s the point of obsessing over money all the time and saving and scrimping if you don't get to enjoy it and spend it?’ That was maybe my favorite tip of all.”

4. Prioritize Retirement Savings
While paying for their kids to college is considered important for many wealthy Americans, it’s not their top financial priority, noticed D’Agostino. Instead, it’s having enough for retirement. “Person after person told me, ‘retirement first, education second,’” he said. “There’s no such thing as a loan you can take out for retirement, but it is okay to borrow money to pay for college.”

5. Eliminate Self-Doubt  

For Corcoran, despite starting out as a woman in a man’s world and feeling intimidated at times, she attributes her success to the core belief that she’s worth it. “The big enemy out there is not the crowd you compete with or what they’re telling you, but your own self-talk. I had to learn to defeat my own self-talk inside that said, ‘you don’t have the right…don't try it.’” Instead, she learned to say to herself, “I have the right to be there,” and the money followed.

When it comes to building financial success, what do you think are some of the tricks to trade? Send me your thoughts on Twitter @Farnoosh and use #FinFit.