I’m a bit baffled by the news that came out over the weekend, where Topix.net raised $15 million to make their total amount of money raised to about $20 million (~$5 million in a previous round). The reason I’m baffled is because they now have about $20 million but I can’t see any original content on their site — all they do is aggregate everybody’s else’s content, let people leave comments and posts, and then display it. All that money in the bank and they don’t actually pay anyone to do any kind of news reporting or story writing.
Another news startup that’s being hyped more than any other startup in the past 6 months is Daylife, a “distributed news platform” that supposedly gathers and organizes news in ways that are relevant to the user, showing sources and quotes, etc. They recently announced their first round where they were funded by twice as many investors as it has employees (!!!) which I find just astounding. From what I’ve gathered about Daylife, their site is an automated aggregation and customization portal, with possibly a handful of editors making sure everything is greased and working. Again, lots of investors and money and no original content or news-breaking to show for it.
At 9rules we do a lot of the same stuff, but replace “news stories” with “our members’ blog entries”. We aggregate and cache content from hundreds of sources, organize it by topic, relevance, and freshness, and also allow people to post their own stories/content and comment. The main difference is that we’re a team of 3 who only work part-time on 9rules, we’re self-funded (turned down investments, not really needed) and don’t need to hire anyone else as we’re running things and growing just fine on our own. What I’d like to know is who is honestly needed to run these user-generated, completely automated, content aggregation portals? What are these Topix.net people doing besides watching the stories come in and populate themselves in their database? How many engineers and designers do these automated portals really need to hire — it’s like too many cooks in the kitchen, all bustling around, screwing things up. Set up the service, set up the algorithms, the design, the features, and then all you really need to do is make sure nothing breaks. Want to roll out some new features? Great! Write about 10 lines of PHP and pull some data out of the db in a slightly new way and you’ve got yourself a point release.
Topix.net doesn’t do anything special, they’re like Newsvine but with a shitty design and less community-centric features, where’s all this money going to? It’s obviously not “ease of use” or “user-centered functionality”. The way that Daylife is being hyped the site better revolutionize the way people around the globe communicate and comprehend the world around them all while cooking me eggs and singing to me. Where is this money going? Why do people actually need it?
About Mike Rundle
Looking at the (Topix) investors, I don’t think this is traditional ‘funding’, it’s obviously buying a 75% stake in “new media”. It seems the newspapers find the technology (finding, ranking, relevant news) valuable enough to make a business out of it.
Not everything web2.0 needs to be about a community does it? ;-)
I think this time it’s simply relevance. Generally speaking, the internet can deliver that, a newspaper to everyone’s doorstep can’t.
I’m all with you man. I look at so many of these startups spending millions of dollars to make a product… that I could have hacked out in three weeks if I had full time to spend on it.
Sure, servers cost a lot of money (relatively to a brand new website) — but hell… how much can you really spend? A few thousand a month and have a small farm?
I guess bright colored walls, XBOX360′s in the lounges and beanbags cost a lot of money.
Good point Mike. My guess is that offices are expensive where they are, that people want a really decent salary, and that they don’t want to have any pressure actually making any money before their goals are reached.
Or maybe they’re just greedy, what do I know?
I couldn’t agree with the sentiment of this entry any more. I see more people seeking capital just because it’s there rather than investing in it with their own funding (loans, friends and family, etc.) or putting the whole money stashing off until it’s really necessary. You end up making a lot more in the end if you hold off until capital is absolutely necessary to move forward.
I’m often asked why I don’t speak to venture capitalists or angel investors from the get go and I always respond with: “it’s not necessary until it’s necessary.” It might sound like a silly response, but you really absolutely don’t need a capital investment until you need it. Maybe I’m the only one, but I’m fortunate enough to have made enough money through my early years of business where I’m able to get the company off its feet before having to sink it in piles of investor money.
Mike:
Fair questions — although I’ll disagree with your statement “Topix.net doesn’t do anything special”.
First, no one else localizes news down to the zip code level nationwide (so we have deals with AOL, Earthlink, Ask, and lots and lots of others).
Also, we can give you news search results from 50k sources that goes back over a year — Google can’t give you that, nor can Yahoo news ..that takes machines, people and some code. Also, we’re powering technology on 177 different partnert publications
When you guys are handling 16k user generated posts per day, 9M unique visitors, and can autocatgeorize every news story out there every 10 minutes including geo-localizing the stories based on semantic content, let me know.
Scale costs.
We’re pretty efficient, but when we took our initial investment at a $60M valuation, we were 6 people.
Now we’re 25.
To build up the search, aggregation, categorization, scale, community management and everything else is going to take some more folks. Not hundreds, but probably more than 25.
It’s sort of hard to explain but I think the bulk of the criticism could be summed up by saying that Topix might sound like a good idea on paper but when it actually comes down to how valuable a service it is, Topix turns out to be not that great. At least Newsvine has a better web design. Topix is not offensively bad but not great either.
Chris, you were involved with the Open Directory Project, right? Wasn’t that an Netscape project or something? The point is that nobody really knows about ODP nor cares. I hadn’t even heard of it before…that is until someone made a post of it in the 9rules notes section.
Now I can’t help but think that Topix will turn out to be something as obscure and useless as ODP. Can you prove me wrong?
Chris, I understand that people cost money, servers cost money, but how do 25 employees’ salaries plus servers need $20 million? Say you have every single employee salaried at $100,000 (not likely, but who knows) that costs you about $2.5 million a year, tack on another million per year for servers and you’re at $3.5 million a year. $20 million will let you sit, unprofitable, for about 6 years. Now this is assuming Topix has no revenue right now and won’t be pulling in a dime for another 6 years, is that true?
I just can’t see how $20 million is necessary when you only have about two dozen employees and a handful of servers.
Although I agree with your basic thought that the amount of money that Topix.net needs to run, I do digress on what the value of Topix.net is to others. When Topix.net aggregated my NASCAR blog my stats went sky high and have stayed that way. I use the forums weekly to interact with my readers which in turn drives more readers to my blog, which drives more customers to my actual website. I credit Topix.net for putting a lot of money into my pocket with very little effort on my part.
As far as I am concerned Topix.net is a very valuable resource.
Clance, thanks for your comments.As a new blogger, I guess it’s time to do some research on Topic.net..~rick