WePlay.com

Today it was announced that WePlay.com received major funding from Pequot Ventures in New York, a firm I have great great respect for and whose people I know and trust. AS I started to write this post, I admit I was very negative on this investment. In fact, this is what I had written: “It smells to me like yet another in a string of “Web 2.0″ investments in websites that don’t really have solid long-term business models.”

Here’s what I had originally written:

As many have pointed out this morning, there is already a long line of successful websites providing digital services to the youth sports community, including Highschoolsports.net (which was bought for 50m) and eTeamz.com, not to mention other newer sites like  TeamSnap.com and RosterBot.com. It would therefore seem that this is already a crowded space (and one which is shrinking- at least from a traffic perspective), so I’d next look for evidence that someone else could take advantage of an opportunity and do a better job than the existing players. This would have to be a pretty compelling opportunity, since so many have tried and are trying to penetrate this space.

I was then going to point out that the only ways WePlay is differentiated are the following: 1) It’s a little more Web 2.0-y than some of its competitors, 2) It’s got social networking – whatever that ends up meaning, and 3) It has major sports figures involved.

This is actually where I changed my mind, because while I was cynical about these differentiators at first, I can easily re-phrase them to be quite compelling: 1) A lot of the other sites in this space are really poorly designed at at a cursory glance seem like they’d be clunky and difficult to use, 2) It doesn’t seem that anyone has tried to integrate social elements into what are ostensibly team management tools (a logical next step for something that is by definition a social activity – sports), and 3) It has major sports figures involved that will undoubtedly drive traffic and benefit marketing efforts. As for the business model, services like team mailing list management, profiles, and calendars are pretty cheap to provide, and there isn’t anything else about this service that seems like it is going to be bandwidth or storage intensive. However, my gut tells me that these are services that leagues and coaches would definitely be willing to pay for, even if not that much. My advice would be this: keep building a solid product, figure out a way to market it directly to large groups of users (like local little leagues), and don’t blow all your money on the big stars just for PR value.

So there you have it. I can actually change my mind. Congrats to everyone at WePlay – and good luck!

The news from Goldman and what it means (maybe) for startups

I’m sitting in the Denver airport on my way back to New York and I’ve just heard the awful news that Goldman Sachs, yes, Goldman Sachs, is going to lay off 15% of its workforce. This is obviously horrible news – Goldman is the marquee bank on Wall Street (and it has a sterling reputation for taking care of its employees), and this means that other banks will almost certainly follow suit. Supposedly the layoffs are going to be mostly in capital markets and support staff. Following the near bankruptcy of Bear Stearns and acquisition by JPMorgan last week, this is huge news that plunges the economy deeper into the big “r” word (I dare not say it out loud .

From my perspective at the helm of a startup music/web company,  all this news could be a signal to entrepreneurs to take funding now if they can get it. Of course, I’m never in favor of handing equity over to investors for no reason, but if you’re not on sound financial footing it might be wise to have enough capital in reserve to weather the storm. I won’t go so far as to say that any startup should take all the money it can get – the same formula won’t apply to every business – but there is obviously merit to looking at your financial situation through the lens of broader economic conditions.

Just to play devil’s advocate and make matters more complicated, tech is typically insulated from broader economic downturns due to lower capital intensity (among other factors), so again, today’s news from Goldman isn’t a clear signal in one direction or the other. On top of that, strategic players and financial institutions are going to need to continue expanding their businesses and producing returns for their investors – “r” words don’t change that. Every time the economy takes a turn for the worse cynics forget this simple fact and start screaming that the sky is falling and any startups that don’t stockpile cash are going to be done for.

That said, the news from Goldman is a clear signal that entrepreneurs should be thinking hard about their capital situations, and for some, it may be a good time to store up cash for the winter.