Sequoia is a small investor in Fon. Sequoia is probably the most famous VC firm in the world. But Sequoia, as you can see from this presentation is confused and in a state of panic because first they made all these investments some very recently, and now they are telling their own companies to Get Real or Go Home. Plus they are coming very late in the “we warned you” advisory role. Allen and Co is another investor in Fon and Allen and Co advised us that markets were drying up for start up fund a year before Sequoia. At Fon we listened to Allen and Co closely and made the necessary adjustments. These painful cost reductions were done at Fon half a year before the other Sequoia companies who are only getting their warnings now, in the midst of the hurricane. So we are ahead of the game thanks to Allen and Co. We now find ourselves losing around 300K euros per month still significant but down from 1.2 million euros a year ago. With revenues and margins growing we are going towards profitability in 09. September was our best month in terms of revenues, margins and cash burn. Sequoia now only owns around 1% of Fon but if I had Sequoia as my lead investor I would wonder why is it that it took them so long to warn their companies. Maybe because Allen and Co is in NYC they seat at the center of the current financial hurricane and were able to warn us so much earlier but my advise to Sequoia would be to stop panicking and take advantage of the crisis to make more opportunistic investments.

Here´s the whole show.

When I was in college Prince used to sing “we are going to party like it´s 1999“. That´s what the markets are singing now. The problem is that 1999 was almost a decade ago. But the value of stocks now is the value of stocks in 1999. If you had kept a 1999 newspaper it would do now. The world however has grown around 40% since then. World GDP that is. So what are the markets saying? That we are going to shrink to the levels of 1999? I don´t think so.

I think we will have a bad recession, negative growth, a rise in unemployment. But I don´t think we are going back to 1999. That´s why I started buying stocks last week. And I am down 21% on around 20% of my portfolio, the rest is still in cash. What did I buy? Not C and BAC, I sold banks and those account for most of my loss now. I was shocked to see that Citigroup and Bank of America shares collapsed after the bailout. Banks may turn around but buying them is for government watchers. They are the epicenter of this hurricane and so subject to the whim of some ex GS employees that traditional business logic does not apply to them. Why did Lehman go under and Bear Stearns was helped? I think what Paulson is doing has no logic and I was wrong in thinking that I could understand him or the markets as they relate to government intervention. Instead last week I bought utilities, huge pharmaceutical companies like Merck or Lilly, and Dell, Microsoft, Apple, Nokia and some other very large tech stocks. And if this week they go down another 10%, I will buy more. My rule now is that for every 10% stocks go down I put another 10% of my portfolio in top stocks. And my objective is to keep those stocks for my 4 children. Looking back a month ago when I started buying some stocks of course I wish that I had resisted my instinct for hunting for bargains and waited. I would be 21% better off today. Still I am sure that we are now or in the next months in the buying opportunity of their generation. And then we can party, buying in 2008 at prices of 1999.

I just found an article in the New York Times that makes the same point I make but it´s much more elaborate and better.

Lunch with BankersBankers are so scared. I have never seen anything like this. Of course everyone else is scared as well. In this video I talk about my last meetings with different bankers.

Today we are announcing the launch of the first Fonera 2.0 Beta DEVELOPERS ONLY Edition in our French, German and Spanish online shops. It is a limited edition of 1K units at a reduced special price
of Euros 39.95 (VAT included). This first Edition of Foneras 2.0 is intended for Developers to be able to start playing around with and programming their own applications for other Foneros out there. It comes with a firmware that has the Basic USB functions implemented so Developers can use that to create attractive apps with multiple USB devices attached to it.

THE DEVICE
Fonera 2.0 Beta DEVELOPERS ONLY Edition works just like a Fonera+ in terms of the WiFi and FON Community Feature and shares the same housing as Fonera+ with an extra LED (USB). The big difference is the USB 2.0 Port that allows several USB devices to be plugged into the router. Devices
like USB Hard Disks, USB Printers, USB Scanners, USB Webcams and many others that will slowly be added to the USB Supported Devices list for Fonera 2.0. New USB 2.0 devices perform best on this unit but some legacy USB 1.1 may not work well. We suggest you always use a USB 2.0 HUB so you can plug in several devices in order to get the best performance and connectivity with Fonera 2.0 Beta.

I know that the markets suck right now and everyone is feeling depressed so here it is, la Fonera+ that allows you to hack your dreams away for only 39.95 euros (sorry for that 95 cent thing) let´s say 40 euros, still a good price. And if you come up with a cool app for the Fonera 2.0 write to me and I will personally send you a refund for the Fonera. And just in case you are coming to the Facebook Garage in Madrid with Mark Zuckerberg that Fon is hosting next Monday we will be showcasing it there as well.

THE APPLICATIONS
Fonera 2.0 Beta latest firmware comes with the following USB Beta Applications:
1. File Sharing: using the Fonera 2.0 Beta GUI
2. Printer Server: for USB printers to be shared as a Network Printer
3. Scanner Server: for USB Scanners also to be shared
4. USB Webcam: you can see your USB Webcam from any computer connected wired or wirelessly to the Fonera 2.0 Beta (only some chipsets supported)
5. Plug In Interface: this is were new apps will be able to be loaded just with one click

Read More

I just found out that Martti Ahtisaari, the father of my dear friend Marko Ahtisaari has won the Nobel Peace Prize. In times like this when global recession is almost a certainty men lke Martti Ahtisaari, who are few and hard to come by, will be in more demand than ever. Last time we had a global recession we ended up in WWII. Poverty makes people compete harder and sometimes war is simply seen as competition via other means. And it is then that a man with the incredible track record as a pacifist as former President of Finland Martti Ahtisaari is needed more than ever. Congratulations!

And btw, he can smile and relate well to people, but this is the only picture I could find sorry. Ok now I have a better picture here from Marko and Lisa´s wedding. Thanks Rodrigo!

Both Danny Rimer of Index Ventures and Mike Moritz of Sequoia are my partners in Fon. At the same time I am an investor in Danny Rimer´s fund. What I would do if I was a top tech VC? (I consider Mike Moritz the top tech VC in USA and Danny Rimer the top tech VC in Europe). I would buy stocks of the listed companies who tend to buy the companies I invest in. If that requires consent from my investors I would try to get it. Why? Because Cisco, Nokia, Google, Yahoo, Apple, are all down over 50% and frankly I see a much better opportunity for Danny, Mike and all other VCs to make money in the next 18 months buying shares in these companies than investing in the next start up. Plus these companies need somebody who wants to invest with them now! I would put half of the remaining funds in the top tech stocks and the other half in start ups further rounds. As far as new start ups, I would get out of that business altogether for a while. We know what happened to Bush we chose to go into Iraq before succeeding in Afghanistan. Overstreching is bad.

Before the rescue packages were announced I said in my blog that a gigantic rescue package was needed to restore the economy. In an article in the Huffington Post entitled Robin Hood Bush I also said that these packages could actually make money for the taxpayer as government bought mortgage pools for what the market thought they were worth (very little) and held them for 5 or 10 years and found that the actual money lost on them could be less than what the market thought now. I also shared with my readers that I had bought stock in Citigroup and Bank of America and recommended to sell these shares as I did when the package was announced. My thinking then was that C and BAC were still too risky as people did not really know what the rescue plan, then announced would entail. And frankly people still do not know. And there is tremendous uncertainty. In the end the argument that got packages approved around the world including the ones in Europe this week was the Robin Hood Bush argument extended to the Robin Hood Gordon Brown or the Robin Hood Merkel, or the Robin Hood Zapatero (he likes to think that he is more frequently Robin Hood). First Paulson said that US taxpayers could make money with the $700bn for the bailout aka rescue. Now every Secretary of the Treasury around the world is saying the same thing. Spain for example copied the US model and prepared a $70bn rescue which is probably a bit higher than the US rescue if GDP weighted. And Pedro Solbes assured Spanish taxpayers that the package would not cost them anything. By now I think we have gone too far with these assurances. The truth is that nobody knows if these packages will make or lose money for the taxpayers. We can only hope they will. We can only hope that what is coming in the next 5 years is a recession but not a depression as the markets now believe because current share prices are depression prices. Personally I am still optimistic that the markets are over reacting now. Not in bank shares themselves which I bought and got out as they are the “eye of the hurricane shares. But in companies like Microsoft, Intel, Dell, Nokia, Apple, BT, AT&T, and other global giants. Currently most technology companies are down between 30% and 65%. I started buying some of their shares in prudent quantities this week. As an entrepreneur with the natural optimism of entrepreneurs I just can´t believe what markets are predicting namely a global depression. The case of Dell or Apple are interesting. These are companies with tremendous cash in their balance sheet, growing fast and their shares are down over 50% of their highs. So I don´t know if governments will make money buying cheap bank shares and discounted mortgages. And I don´t know if I will make money buying big tech stocks. But as I said I started buying and will continue to increase my holdings if they go down.