Well we all saw this coming in the last few months but even so it is shocking. Waterfront Media buying Revolution Health valuating the company at around $100 M, meaning all the hard work put by the top executives in the field (Steve Case, Colin Powell; Jim Barksdale, Frank Raines & Carly Fiorina) yields a $-0.50 on the $1 return… OOppppsss.
I’m having flashbacks of Mercata & Paul Allen (he also talked about a revolution back then) is it 2001 again?
How can we explain this?
Is it the falling economy? Hubris – one man trying to take over a whole vertical? Excessive acquisitions? Or maybe just the troubling fact that this market is not as big as we once thought?
DailyStrength are in financial troubles and had to cut back dramatically after failing to raise additional funds, iMedix declared they are about to close big $$$ funding about a year ago… and so many others are making disturbing noises you just can’t ignore anymore. Will my list of Health Social Networks going to be half the size in one year? Maybe less (time and long…).
Did it ever make sense to seed fund a niche social network website with $7M (DailyStrength) or even $4.5M? (WellSphere who seem to be using the money to change the UI and who they are every 3 months…). Wouldn’t it make more sense to give the entrepreneurs $1M and send them off to prove there is a business hiding somewhere around here? No wonder no one wants to invest in this market now. Hey – Steve Case lost $100M isn’t this enough ????
The only chance is in finding the business and all I see is advertising (and mostly google adsense), that can work for a small company with low overheads and a really laid back investor …. How many of these have that? if I had to bet, I’d put my money on those who raised moderate amounts and managed to gain some strength. Inspire, MDJunction and maybe Trusera (not sure about the strength part here) have the highest chance to keep their heads above water in the next 12-18 months.
Looking back at M&As in the market doesn’t explain these investments either. HealthTalk and CarePages might have done nicely, but that was Revolution at its best. Other than that not a single outstanding acquisition and if anyone here thinks they are going to be AOL’s next bebo and sell for $850M, you forgot to take your pills today.
I don’t think I ever wrote something with so many question marks before, but I guess that’s just how I feel about your market right now. Come on over everyone, there’s plenty of businesses in IPTV ;-)
Sam
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5 comments:
Sam,
You are right on. Many of these niche companies assumed they needed to follow the start-up model throw money at a brand and the valuation will increase. Now more than ever its critical to prove the market, monetize along the way, stay lean, and grow only as needed. So much of this can be done with scalable outsourced resources too!
Another interesting company to watch is www.WebTribes.com, they run 5 niche sites:
www.DepressionTribe.com, www.AnxietyTribe.com, www.OCDTribe.com, www.AddictionTribe.com and www.HIVAidsTribe.com. From what I can tell they are a lean, agile and hugely popular within their niche.
Hi Sam,
Interesting post and blog.
Thanks for Putting MDJunction on the "highest chance" list ;-), sure looks like we're heading in the right direction.
One thing i do have to say. you wrote "No wonder no one wants to invest in this market now". that happens to be wrong. I've talked to 5 different CEOs in the field over the past month, 3 of them have the option to for funding available, the price of money is not what it was and it comes with many restrictions, but there are many who are interested in our companies. I'm happy we're not looking for money now because the market is looking bad as a whole but if we were i'm sure it be just like 18 months ago....
i'll continue to read your blog, how about something about us?
CU
roy
I have experience with health social networks and you make a lot of good points.
It doesn't make a heck of a lot of sense to throw a ton of money at a problem. It's not surprising Revolution Health had to merge. It would've been hard to become sustainable with the large amount of seed money thrown in.
I think the lesson to be learned is start small and grow by word-of-mouth.
The market appears to be over-saturated but no one is tackling the problem appropriately.
Thank you all for participating!
Hi Roy – nice of you to drop by. Let’s just say that IMHO you’re right about being happy not having to look for money right now…I will cover MDJunction soon. Maybe we can even do an interview?
Anonymous(1) – I am well aware of WebTribes, they are in my list of health social networks. It seems you are involved with the company and I’d be happy to learn more of the site (right now I just refer to you as the ‘like Inspire’ site). You can email me and we’ll take it from there.
Anonymous(2) – I’d love to hear more about your ideas on tackling this.
It appears as though everyone at Revolution Health is getting the boot.
It's not really a merger but rather an acquisition.
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