Pimp My Tech Services Business

You've dreamed of it.

You're sitting in your house, minding your own business, and the doorbell rings.  You peek through the front window to see who it is, catching a glimpse of the rusted out '82 Chevelle in your driveway, and...  can it be?  Yes!  Yes, its him!

Xzibit has come to pimp your tech services business.

He's going to set you up with a phat new 22 inch metadata warehouse and some chrome 3rd parties who want to know what your userbase is up to and are willing to pay some bling for the audience data and access.

There's a catch, though.  Your company might look like a data business on the outside, but, just like on "Pimp My Ride", they never pimp your engine.  Inside, providing a steady, but unspectacular cashflow is still your little tough to grow service business.  It pays the bills, but VC's aren't really falling over themselves to get it.  Try raising capital on the promise of your data centric business but based on the revenue multiple of your yawner of a service business.  The two just don't match.

The ironic thing is, yawner or not, your service business actaully has, well, real live guinuine customers, and those customers are what drives your data business.  You don't want to give those away for free, but a VC isn't really interested in that side.  VCs want in on your startup data business, at a single digit premoney, not a 3x multiple of a services business that doesn't scale.  They do care about it, though, because they have to--its the boring core services business that generates all the metadata that's driving the upside of the new, but untested, venture.

You could seperate the businesses and even have one invest in the upside of the other, but then how do you divide your staff?  Try holding a company meeting and asking for volunteers to stay to care and feed the services side while everyone else joins the new Web 2.0 data venture.  Who's going to be the odd man out on the management team?  Seperating:  easier said then done.

But yet, if you don't raise money, you might not be able to take advantage of this potential opportunity.  Clearly, as services business realize that data is the key to differentiating themselves in a crowded market, a lot of thorny questions are going to need to get addressed to ensure they hit the ground running with the right balance sheet and the right resources.