Finding Financing Firmament

The incredibly period-piece song went "Love is Like Oxygen, you get too much you get too much, not enough and you're gonna die."  Well, funding is not like oxygen, as both user and funder of Amp'd Mobile found out  this week as the company slipped into Chapter 11.

According to mocoNews:

According to the court documents, Amp’d owes about $33 million to its infrastructure/network provider Verizon Wireless, followed by its handset provider Motorola—$16 million; Vivendi about $10 million, BestBuy about $8 million; MTV Networks about $1.8 million; and others. In total, the total debt is more than $100 million. Amp’d says its assets total less than $100 million.

Well over 100 Million Dollars in funding and they went into Chapter 11.

Around the world is, actually, just enough of an atmosphere to give us the air we need to breathe.  We have an ecosystem that is balanced to provide us with the right amounts of oxygen.  If the earth's firmament was filled with nothing but oxygen, plants would die off and the ecosystem would be lost.

I think that, apart from a host of bad business assumptions, that Amp'd was over-capitalized.  We talk a lot about the ill effects of under capitalization, but not of over-capitalization.  Over capitalization has a strong impact on a company's ecosystem.

Amp'd's warchest led them to have the massive television advertising campaigns that we've seen over the last few years.  They were everywhere.  And, while iPod ads have often made me take notice, Amp'd's ads never elicited so much as an eyelid twitch.

I would say that over-funding makes companies go for maximum "glitz" and "exposure" (and certainly over-staffing).  Amp'd's viral marketing was nearly non-existent.

I have found this in many start-ups.  They start selling the cake before it's baked.  Then customers come in and they serve up something, well, half-baked.

With 33 million, I dare say one should be able to architect a very compelling music site and hardware.  I'd do it with a very small team focused on quality product first, networked (not network) marketing second, and hype in the appropriate places.  Have the guts to spend the money slowly.

Technorati tags: Amp'd, Motorola, Vivendi, Verizon Wireless, over capitalization, wireless, mobile

Blogged at Warner Center Marriott in Woodland Hills, California with Live Writer

Comments

[Herbert]

Their ads were truly not very inspiring.

[Edward]

Jim -

Marc Andressen has a post about the current VC environment and how the structural changes in the private equity and institutional investment world have created an "asset class" of venture capital, thus guaranteeing independent of this year's returns that there will be money plowed into risky and novel ideas (good, bad, or indifferent ideas, with good, bad, or indifferent execution).

http://blog.pmarca.com/2007/06/the_truth_about_2.html

"And that's why, from where I sit in Silicon Valley, there are probably 200 venture capital firms within 20 miles with likely over $20 billion of capital at their disposal chasing a very small number of good potential investments, despite terrible average returns for the asset class over the last seven years.

I love this country."