NewsPin : Pinning the Taxpayer to the Wall (and without the courtesy of a reacharound)
Add another company the list of failed taxpayer-funded startups. (Actually two, depending on how you count -- more on that in a moment). Newspin recently posted this tombstone on their site:
|Apparently it's not in vogue to thank the taxpayer investors for their support|
What's in a Name?
Normally we don't make fun of a company's name (the business model usually provides enough comic material), but we'll make an exception in this case.
New Spin? News Pin? News P In? Newspin? NewsPin? We're confused.
We get more confused with their site name. It's not newspin.com, since that's already owned by a company called New Spin 360.
So is it.. newspin.eu? newspin.ee? Nope. Can't guess? Why, it's newspin.co of course! Yes, when you want to go to a website, you always prefer .co to .com, right? Well, the people of Colombia might go there, since .co is the top-level domain assigned to their country, but not anyone else.
|Colombian woman who likes newspin.co ... and men with large monitors|
But enough of lusty latinas. What was their business idea?
Party like a.. social media rockstar?
Here's an explanation of their product, directly from their website, before it was taken down:
|Do social media rockstars get all the girls?|
Oh, and you're supposed to pay them for this also. We'll let our readers decide if this is a winning business idea or not. (Hint: They failed.)
Bad Boys, Bad Boys, Whatcha Gonna Do?
The Estonian company behind NewsPin was not called NewSpin, but instead Inner Circle. Reggae music fans will immediately recognize Inner Circle as a popular reggae band. How popular? They even performed at Cafe Amigo in Tallinn last year!
Any Inner Circle fan, which surely encompasses all our readers, also knows that their most popular song, Bad Boys, is the theme song of the long-running American TV show Cops.
|"Calling all cars! There's a misuse of taxpayer money in progress! Send in the auditors!"|
You're probably wondering about the money situation. Well back in September 2010, the taxpayer-funded Estonian Development Fund (Arengufond) gave them 88,006 euros (1,377,000 Estonian Kroons to be exact). In their press release about the investment, they stated:
"Inner Circle presents itself as trashfree Facebook. The ambition of the enterprise is to create and go global with an user-friendly environment for group socialising, which differs from the current Facebook by privacy principles."
Of course, Enterprise Estonia (EAS) probably felt some jealousy that Inner Circle was spending so much time with Arengufond, so EAS handed over 5,113 euros of taxpayer money to Inner Circle three weeks later, in a bid for attention. We also heard EAS dressed up in its prettiest skirt, and put on extra makeup that day. Our sources were unable to confirm whether a threesome involving Inner Circle, Arengufond, and EAS took place later that night.
|NewsPin's taxpayer money, nicely pinned up of course!|
The Rich Need Help Too!
Now for the interesting part. In the same Arengufond announcement about their investment in Inner Circle, they stated:
"The seed stage start-ups have difficulties in finding investments all over the world, so as the developer of local venture capital market we pay more attention to the competent teams and emerging enterprises in very earlier stage." (emphasis ours)
Did this company really have trouble finding investors? Let's see what ArcticStartup reported about the company when the investment was announced:
"Inner Circle's founders include serial entrepreneur, and co-founder of Martinson Trigon Venture Partners, Allan Martinson as Chairman, while the team is led by CEO Andrus Raudsalu, ex-CEO of major Baltic web portal Delfi." (emphasis ours)
So, the founder is Allan Martinson, a venture capitalist? Do venture capitalists have trouble raising venture capital money? Isn't that like a baker who can't make bread?
Actually, we don't think he'd have trouble raising investment money. He's a well-respected and experienced entrepreneur. He even has his own page on Wikipedia. If anyone can raise investment, it's him.
So why did the taxpayer have to fund this?
A Lesson in Double Dipping
Don't worry, it gets worse. According to the Estonian company registry, Inner Circle was founded in June 2010, and according to CrunchBase, Kalle Volkov started as CTO of the company then. Normally, that's nothing newsworthy, but it turns out Mr. Volkov has his own company, Hiirepadi, which appears to be a one-man consulting company. It also turns out that in June 2010, EAS gave Hiirepadi 4,808 euros of taxpayer money:
|Was Hiirepadi invited to the orgy?|
So as far as we can tell, Mr. Volkov was working for Inner Circle and taking taxpayer money, while also working for Hiirepadi and taking taxpayer money!
This is a bit similar to the double dipping we reported in our post about Publification last year. We didn't like it then, and we don't like it now either.
The Inner Circle Swingers Club?So remember earlier in this post, we reported about two failures? Well it turns out that Inner Circle initially launched a different site, called PosterBee, which is now long gone. In fact, that was the product that Arengufond touted in their investment announcement. You can read an old TechCrunch article about PosterBee -- this post is already too long to go into it.
Sadly the Inner Circle was indeed a bit of an inner circle. As Äripäev reported back in 2010, another investor in Inner Circle turned out to also be on the board of Arengufond. So he invested in a company, and then was on the board of the state-funded organization that invested in that company. Do they not teach the meaning of "conflict of interest" in school in Estonia?
There are two lessons to be learned here. The first is that EAS should not be funding the same people to work on multiple projects at the same time (as appears to be the case with Mr. Volkov).
The second is more important. If Facebook's Mark Zuckerberg or Amazon's Jeff Bezos wanted to found a new company, do you think they would go to the American taxpayer for funding? We doubt it.
So why do successful entrepreneurs and venture capitalists like Allan Martinson need taxpayer money for their new startups?
Is there even one good reason why the taxpayer should be funding rich venture capitalists? Tell us, dear reader. Comments are welcome.