Valley Scribe

Not to get obsessive about tech IPOs again . . . but one deal now in registration, that of Internet-advertising company ReachLocal Inc., could be a predictor of whether the lackluster market for new tech deals will perk up soon.

Seven-year old ReachLocal, backed by outfits including VantagePoint Venture Partners and Rho Capital Partners, racked up $203 million in revenue last year. The Woodland Hills, Calif. company helps small- and medium-sized businesses get more out of their online-advertising buys, using a direct sales force to drum up most of its business.

The company also posted a $10 million profit last year, compared with losses in each of the previous four years—making it look, at first glance, like a pretty robust tech-IPO candidate in these tough times.

But there’s a catch: ReachLocal would have been unprofitable in 2009, it seems, if not for a one-time, non-cash $16.2 million gain from a recent acquisition. In fact, the company says in its latest S-1, filed with the SEC this week, that “we expect to incur net operating losses for the forseeable future.” (A company spokesman declined to comment, citing the regulatory quiet period surrounding the deal.)

Then there’s the broader, pesky issue of how ongoing economic turmoil will affect customers’ willingness to spend money on online marketing. ReachLocal says in its filing the recession hurt its business in 2009. Indeed, annual revenue growth has slowed recently, to 38% percent last year; revenue more than doubled in 2008. In early 2009, the company stopped hiring salespeople, it told the SEC, though it resumed hiring three months later. But it was at “more modest level” than in 2008.

Oh, and the company also disclosed that as of Dec. 31, it had “significant deficiencies” in its internal controls, according to its accounting firm. Apparently the problem has to do with how ReachLocal capitalizes costs for internally developed software..

So why does all this matter? Because it makes ReachLocal a bit of a reach (sorry) to actually stage a successful deal. At least one prominent Silicon Valley banker tells me he views the company as a “canary in the coal mine” for future tech IPOs. If ReachLocal, an essentially unprofitable Internet outfit, can actually get out, the offering could open the floodgates for other tech deals. There is certainly a backlog of tech companies in registration that are anxious to go public. But if the deal stalls, other startups will have to hang back.

The market’s recent dive certainly isn’t helping matters. For years now, though, only the highest-quality Internet companies have been able to stage successful IPOs—something ReachLocal should keep in mind.

One postscript: My previous missive on the lack of high-profile tech IPOs, posted Dec. 18, seemed to strike a chord with BusinessWeek. Peter Burrows followed my story with a similar one in the magazine on Feb. 4. He cited Yelp as another company opting to raise money privately, for now, and even quoted my friend Lise Buyer.

In their new book “Getting to 50/50: How Working Couples Can Have It All by Sharing It All”, two Silicon Valley professionals argue that working women don’t need to hop on the “mommy track” or opt out of fulfilling careers once they have kids. Many can keep fast-tracking it at work–if their husbands pick up the slack at home and companies stop demanding constant face time at the office and unnecessary business trips.

You’d think this hot-button book would be sparking lots of national discussion. It seems particularly relevant now, as the recession puts more of a spotlight on the benefits of two-income families (see this piece in the New York Times on Sunday, and this more incendiary one from San Francisco magazine last year). If one spouse loses a job, it’s pretty helpful if the other remains employed.

Judging from the popular reception to “50/50”, though, age-old stereotypes about women’s roles die hard. The book’s core thesis–that women’s jobs are not inherently less valuable then men’s, and dads can do just as good a job at home as moms, if given a chance—hasn’t really caught on in a big way.

The idea “goes against this Venus/Mars plotline,” and the entrenched cultural conventions about marriage and motherhood so many people take for granted, says Sharon Meers, a former Goldman Sachs managing director who left the firm in 2005 to write the book. I met her in December at a high-octane cocktail party for Silicon Valley women in technology. Guests included hotshots like Facebook’s Sheryl Sandberg and Accel Partners’ Theresia Gouw Ranzetta—two women who also happen to have small children. (Did anyone ask their husbands, after they had kids, “So, are you going to stay home now, or work part-time?”)

The occasional role model aside, it’s clear the 50/50 domestic situation promoted in the book is not reality for most working women. And that inequality has a cascading effect, Meers and co-author Joanna Strober say: Employers see women shouldering most of the childcare and household burdens and assume that even top-performing women can’t focus on their jobs they way men can. The book points out that if a woman only stays home half the time a child is sick–or goes to half the soccer games that start at 5 p.m.–she’d be available more often for that offsite meeting or deadline work. Dads can step up.

Meers and Strober, a private-equity executive now with Sterling Stamos Capital Management, say some women unwittingly promote the old-school mindset. They crack jokes about how their husbands can’t change a diaper or get the baby to bed on time when they’re out. (More Venus/Mars.) Women wind up bossing their husbands around when they do try to help out, assuming moms are the masters of the domestic universe and no one else can figure out how the household ticks. That makes men less enthusiastic about vacuuming and picking up the kids from school. Lesson: lighten up, ladies.

The press attention to the book thus far is revealing. Meers and Strober seemed to stun “Today” show anchor Ann Curry when they appeared on the program last February, shortly before their book went on sale. Curry almost fell out of her chair at one point as she asked incredulously, “You mean there’s no evidence that children are damaged because their parents are not at home?”

Actually, that’s true: A massive, 2006 study by the National Institute of Child Health and Human Development, cited in the book, found that children who were cared for solely by their mothers fared no better, in terms of cognitive skills, language and behavior, than kids in outside childcare.

A book review in the Financial Times last year derided Meers’ and Strober’s advice to divvy up household chores more equitably, saying alpha males will be alpha males and women should just hire a cleaning lady. (To be fair, the book got more sympathetic mentions from Time, USA Today and Elle magazine.)

I do think “Getting to 50/50” glosses over some of the immense challenges families face caring for young children while both spouses hold down demanding jobs, even in marriages where men do dishes and midnight feedings. The stress involved in that lifestyle can be overwhelming at times, particularly for people who can’t afford domestic help. Many women simply prefer to stay at home with their kids, a choice Meers and Strober say they respect.

The book makes the argument that working women can find smart ways to petition bosses for more flexible work environments—opting out of silly meetings and client dinners, for example. Men should put bosses on notice that they, too, reject a 24/7 work cycle as compatible with parenthood. Those changes would go a long way toward easing two-career family stress. True enough. But while Meers says the principles in the book apply to women at all economic levels, I have to think job flexibility is probably a little easier if you’re a partner at a law firm than a waitress at a diner.

The “have it all” tagline in the book’s title also seems misleading. “50/50” offers lots of anecdotes about women who have kept their careers on track by working reduced hours for a few years, until their kids were older. Clearly, job sacrifices sometimes have to be made. But the book’s message—that women shouldn’t be the ones making all the sacrifices—is a salient one I think many people are still hesitant to address.

Corporations seem to understand this problem. Meers told me most of the sales of “50/50” have come from companies and academics. “Big companies know they have a big challenges,” she says, because they are losing too many talented women once they become mothers. She’s been asked to speak to packed crowds at companies like Google and Microsoft, where more than 50% of the audiences have been male, she says.

Maybe more flexible and family-friendly workplaces will prod more men to do their share at home, and encourage women to let them. As the rocky economy continues to upend so many families and torpedo jobs, couples may have little choice but to rethink traditional roles and approach work and family more equitably.

Attendees at Tuesday’s AlwaysOn VC conference at the swanky Rosewood Hotel in Menlo Park were treated to some unexpected straight dope about the state the venture industry.

Bill Gurley, the lanky Benchmark Capital partner, kicked off the event with a fairly dire assessment of the industry’s prospects. He laid out the case for decreasing, future fund flows into venture, mainly due to the lingering liquidity crunch facing many top LPs. Showing some before/after weight-loss photos of two really overweight guys, Gurley told the standing-room only crowd that he expects the VC industry to shrink by 30% to 50%. (He didn’t reveal who will take the prize as Sand Hill Road’s biggest loser, but I’m sure that will play out over the next couple of years.)

Gurley’s thesis isn’t new. He discussed it at length in an August post on his own blog, abovethecrowd.com. I touched on many of the same themes in my reporting at Forbes, including a Dec. 2008 story titled (somewhat sensationally, in retrospect) “Venture Capital’s Coming Collapse.”

The basic idea is that university endowments, foundations and others poured too much money into illiquid, “alternative investments” like venture capital over the last decade or two. Many were trying to emulate the market-beating returns of David Swensen, the Yale endowment finance chief who looked like a genius when his bets on private equity, real estate and other non-traditional assets paid off big during the market boom. Now, post-credit crunch, he and his followers are saddled with portfolios that have lost a quarter or more of their value. Universities and foundations are in a panic, with philanthropic donations and state aid spiraling downward, too. There have been plenty of articles about the impact this is having on universities like Harvard, which has laid off staff members and curtailed (the horror) hot breakfasts in student dorms.

Still, Gurley’s talk Tuesday was a stark reminder that Silicon Valley—despite the rah-rah, “recovery is here” talk from many VCs and corporate leaders these days—may still face more pain from the economic dislocations unleashed by the financial crisis. Less money coming into venture means fewer firms and fewer deals being funded—though Gurley insisted there would always be plenty of cash to back breakout companies like Google. He also predicted the Valley would see more “stranded angel” deals, or companies backed by angel investors that would be unable to move up to a series A round.

On the plus side, Gurley said some investors could actually decide to be contrarians and double down on their VC exposure, making up for the cash leaving the industry.

Gurley’s frankness was refreshing, I thought. He ended his talk by telling the audience, specifically, how other VCs would try to put a positive spin on the industry’s woes. Then, in the next panel at the conference, a group of VCs did exactly that. Institutional Venture Partners’ Todd Chaffee quoted back one of Gurley’s lines almost verbatim when he said the failure of some VC firms would be a “healthy shock to the system.”

Right. Funny thing is, I have yet to find a VC who thinks he’s going to be the one to close up shop when this whole thing shakes out.