"You Didn't Build That"
Gerelyn is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It's no secret that the Winkelvoss twins, Tyler and Cameron, feel betrayed by Mark Zuckerberg's ability to take ownership of Facebook (NASDAQ: FB) and its success. The brothers have not been shy about their quest to gain redemption in the mystery that surrounds the evolution of the social network phenomenon that began in its earliest form connecting coeds and caught on like wildfire.
Now, there's something new behind the boys' $65 million smile (the amount in cash and stock that the twins reportedly received in a Facebook settlement), and it has to do with a certain startup launched by yet another pair of Harvard alums. The brotherly duo poured $1 million into SumZero - an online breeding ground for investment ideas designed for the buyside and founded by Divya Narendra and Aalap Mahadevia in 2008, all according to The Wall Street Journal.
The Winkelvoss brothers used their new investment vehicle that bear's their surname to help finance SumZero, which incidentally only welcomes buyside money managers - primarly alternative investment managers. There are some exceptions, for a fee, to who is accepted as members, but SumZero's “country club” approach takes a page out of the book of Facebook's early days when it targeted college campuses.
SumZero's similarities to Facebook cannot be denied. It's an online message board of sorts for people of a like mind to share ideas. It just happens to target a niche within a niche - the buyside of the investment community. Nonetheless, the Winkelvoss boys are getting in pretty close to ground level, which seems to be their intention.
Cameron told the Wall Street Journal:
"We always saw ourselves in careers as entrepreneurs or angels. My favorite toy as a kid was Legos. I loved building things, and that's what we're doing with SumZero."
Whether or not they are building SumZero into a future public company remains a mystery for now. But if the Winkelvoss brothers are intent on remaining in Zuckerberg's rearview mirror perhaps someday we will witness another social media IPO extravaganza.
A SumZero IPO would be grouped among its new technology counterparts, that is those companies that are shaping the next generation of tech via social media and tablets. The old technology clique had its day, too. While this new group of tech geniuses seems to be linked by their Alma matter, the old group had something a bit more rustic in common.
For instance, tech companies like Microsoft Corporation (NASDAQ: MSFT) and Dell (NASDAQ: DELL) were founded in garages before morphing into market leaders. Today, these companies cannot maintain a grasp on market share that is rushing to Apple.
Microsoft's next big thing - the release of Windows 8 due in October - starts about as much buzz as Corona light but in addition to Microsoft others in PC land have a stake in the latest Windows release. PC maker Dell, with origins in both a house garage and college dormitory, is trading 40% below its 52-week high. The company spelled it out in its latest 10-Q SEC filing when discussing consumer revenue:
"We are also experiencing increasing competition from alternative mobile computing devices, including tablets and smart phones."
It's tough to watch the old-school tech crowd contend that the PC is not dead while top and bottom line growth at places like chip materials maker Applied Materials (NASDAQ: AMAT) continues to disappoint. In its most recent fiscal 3Q, Applied Materials' - which looks to companies like Intel for more than half of its business - EPS fell four-cents below analyst estimates at 17-cents per share while revenues declined some 16%. AMAT also reduced its fiscal year expectations amid slowing chip demand in the PC, solar, and flat-screen display businesses.
It's just as painful to read the handwriting on the wall which tells the story of once-tech leaders being replaced by hipper, younger startups. This lifecycle, however, is precisely what makes the way for new businesses like Facebook and SumZero.
The Winkelvoss twins once told BBC that the last chapter had yet to be written in a Facebook saga that with all its bazaar accusations and skirting of the issue began to unfold at Harvard in 2004. They insist that in the end, the truth will prevail, as is preached in the halls of their Alma matter whose battle cry incidentally is veritas, or truth.
Zuckerberg never looked back and frankly since the settlement has his hands full containing the fallout from a shrinking publicly traded company that is worth about $47 billion excluding some items - about half of where it was valued in May. If the twins are telling the truth than karma is a tough teacher.
Regardless, whether or not SumZero gives the Winkelvoss brothers the redemption they are seeking remains to be seen. If it does, capitalism ensures it will more than likely be due to the potential future success of an upstart (SumZero) as opposed to the demise of one online wonder (Facebook).
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