Starting a new  business often has it’s beginnings with an entrepreneur having an idea and a plan to attract customers to a product that has value.  The idea is usually any one of many items  that will provide customers with either their needs or their wants.

A new car, a mattress with adjustable firmness, hiking boots, sunglasses, a warm winter jacket, skis, skateboards, headache medication, Windows Office software, a corporate jet, a Dell computer and an HP printer are just of few examples of the thousands of items produced by companies that have identified needs or the “wants” of people that they think will buy their product.

A business plan usually includes a mission statement that defines the corporate path seeking to provide a customer base with a quality product having value.

The search for startup funding traditionally has a clear statement of structure and a projected path to profitability with a clear outline of how that customer base will be expanded with the attendant expected income. These projections usually include detailed source and customer growth studies.

The downward spiral of Groupon, Zynga and Facebook stock prices is no surprise to anyone who has thought about the needs of potential customers when starting a business.

These companies in their organization structure have clearly concentrated on developing a (mission) plan to create excitement about plans to raise a ton of money with an IPO.

Mark Pincus the founder of Zynca celebrated the success of the IPO by selling, at the first available moment, a significant amount of stock at $12 before it’s dive to a current price of about $2 or $3 a share.

The early actions of the Groupon founding group also caused concern in the investment community. They are dueling with the SEC over accounting practices.  In business it is simply not smart to get into a duel with the exceptionally long sword arm of the SEC

The Facebook IPO will become a legendary story of poor management while raising more money than is anyway understandable to long time conservative financial professionals.

The money in each case was raised with no creditable plan to move to a profitable operation.

Warren Buffet has said that “ he doesn’t invest in technology because he doesn’t understand it” His statement is generous.  I believe that he totally understands that many of the technology IPOs are by companies that have leadership that really doesn’t understand how to build a profitable company.

The three examples here are all too typical.  Groupon and Facebook each were put together by exceptional, but narrow, talent which was not tempered with required business building experience.  Nor do they seem to know how or have interest in meeting customer requirements to build a solid, faithful, profitable, supporting group of followers.

Groupon promotes a discount system that fills their supporting retail organizations with a bottom feeding group of customers who disappear soon as the Groupon discount ends.

Facebook has a huge following worldwide. Unfortunately a large part of the following is either disinterested in the advertising or is often in poor countries where the Facebook following does not have the money to purchase products advertised.

Facebook in an effort to prop up the income column has done a deal with Zynga hoping that they sell enough virtual cows to improve the bottom line

Zynga with a straight face explained their expectation to make money on their free Farm Villa game by selling virtual farm stock and equipment.  It’s hard enough to make profits selling real cattle. I can’t believe anyone would take a company seriously that expected to become profitable by selling virtual cows to it’s game playing customers

Facebook has enough money that they could possibly find a profitable area of operation before they spend it all.

They might benefit by studying the Apple story and the removal of Steve Jobs from the leadership for a number of years during which he learned to harness his brilliance into a plan for profits

Maybe farming Mark Zuckerberg out for a decade would work for Facebook if they could find an interim leadership team  that could figure out how to use the money they have and the millions of followers to build a profitable business.

He seems to be a bright young man. If he gained some maturity and lost the hoodie he might then do a Steven Jobs and take Facebook into a level of sensible operations.

I’m sure Buffet doesn’t write off all technology. There is IBM, Amazon, Google, Discover Bank and of course Apple and many others.  Not too shabby a group.