Founders Keith Daubenspeck and Dwight Badger have suspect pasts as stockbrokers. The start of their careers as VCs is equally inauspicious: They raised $28 million for Pixelon, an online-video startup later revealed to be a fraud run by a con artist. Advanced Equities has been involved in several lawsuits with clients, Forbes reports; has a poor track record of profitable exits; and a reputation for overpaying to get in deals.

But what speaks most to Daubenspeck and Badger's bad business judgment is this talk of going public. In the last bubble, CMGI, an Internet holding company with a large venture-capital arm, posted overheated returns by flipping its startups for cash, and then crashed all the more quickly when the tech-IPO market seized up. With private equity abundant, why would Advanced Equities even want to tap the public markets? Especially with the scrutiny that would mean. If Forbes was able to find all this dirt with a little digging, imagine what the company would look like under the glare of analysts and short-sellers.

Last November, one of its datacenters was brought low, embarrassingly, by a truck crashing into a nearby power transformer. That's precisely the kind of thing datacenters are designed to survive, but Rackspace's did not. Its employees all got bonuses anyway. That's a fanatical disservice to its investors, who now include public shareholders. A more deserving tech company, one hopes, will come to the public markets soon, and erase the memory of Rackspace's broken offering.

The swift executive rotation was a deliberate strategy of former eBay CEO Meg Whitman, a management consultant by training. She called it "repotting" — moving executives around through different parts of the business. While it may have helped her charges' careers, it did nothing for PayPal. The latest potted plant to occupy PayPal's C-suite, Scott Thompson, is bragging to investors that PayPal will soon derive more than half its revenues from websites other than eBay. A good thing, considering how growth in eBay's core auction business is grinding to a halt.

Thiel saw this as a problem back in 2002. eBay was growing fast at the time, but PayPal's investors — the company was briefly publicly traded before eBay bought it — were worried about its dependence on another company. After eBay bought PayPal, executives spent years grinding away at "integration" — even though PayPal, as an independent concern, had managed to neatly fit its payment service with eBay's auctions, without much help from eBay — in fact, with eBay actively trying to replace it with its own BillPoint payment service.

In the years since, what has eBay done with PayPal? It's recycled ideas from the Thiel era, and tried to tout them as "innovatons." It has swollen the size of the PayPal unit to some 7,000 employees. ("What do they do?" a former PayPal executive asked me.) And it has leaned on PayPal to mask slow growth in its core business.

How much would PayPal be worth now on its own, without eBay's bloated management? Would Amazon.com and Google even be trying to challenge it in the payments business? Perhaps it's a question that shouldn't remain abstract.

eBay tried to buy PayPal several times; every time eBay returned to the bargaining table, PayPal's price went up. It finally took the workings of a liquid market to determine PayPal's worth; after PayPal's IPO, eBay had to pay a fair price for the payments company.

Yes, it's time for another PayPal IPO. Too bad Peter Thiel isn't available to run the company — he's making far more money on his hedge fund than he ever did from PayPal.

(Photo by David Orban)

VCs may be frustrated, but they should be happy about having to wait longer. Going public requires a lot of time and focus and energy on things that don’t involve growing a business. And companies that wait longer to go public tend to perform much better once they do. The market is much more finicky, but that means the folks who are planning for an IPO in 2008 have rock-solid finances. The balance sheets are stronger this year than last year because they have to be. Public investors just don’t have the appetite for risk. They’re saying: don’t take these off the grill until they’re well done.

So how's a startup to know it's not still pink in the middle?

It’s double-digit revenue growth. You need to be profitable. You need to be able to convince investors that you’re at the beginning of a very large opportunity, and that whatever advantage you have is sustainable. I don’t think it’s a matter of having $100 million in revenue. That could be the case with many companies, but you also have to show that your business can grow meaningfully in the next couple of years.

(Photo by pingnews.com)

I think it’ll be fascinating because like Google, they like to do things their own way. And that’s been tremendously successful so far. I think that clearly Facebook’s business model needs to be well-proven before anything happens, and that they’ve been smart to put off the process until they put all the pieces into place. Also, though it’s terrific to have Microsoft as an investor, Facebook’s valuation may or may not turn out to be right valuation for public equity investors. But I do think that what they’ve built is tremendous and enduring and that they’ll find a way to turn theirs into a steadily growing, highly profitable business.

True enough — but it turns out that those businesses, cheaply started and cheaply run, did not need much investment; nor would they return much capital to investors. Morgan, a former coprorate lawyer, was counting on public stock-market investors to show up and play the greater fool, taking his startups off his hands for hundreds of millions of dollars. That was venture capital's business model in the 1990s, when Morgan got into the business. It was the one revival he was really counting on. It never happened. And now he and VCs of his ilk have been revealed as the greatest fools of all.

Regulators frown on free communications between knowledgeable company executives and information-hungry investors. LinkedIn offers "compliance" tools, but those tools amount to letting the fox electronically monitor the henhouse. Hedgies surely realize this, and will see LinkedIn's lax policies as a selling point. (Other firms which connect investors with company insiders have, at some expense, created systems which allow the experts' employers, not just the investment firms, to monitor contacts.)

If it gets in trouble, LinkedIn will likely plea that it didn't know how its networking site was being used — the standard we're-just-a-platform dodge. But it will be hard to claim that for two reasons. First, LinkedIn is touting the account managers it's providing who will actively help traders use the service. Second, CEO Dan Nye previously worked at Advent Software, a company which provides portfolio-management software to Wall Street firms. It's not like he's unfamiliar with the SEC's disclosure and monitoring requirements. Rather, one has to think he knows just how expensive complying with those rules are, and that rejiggering LinkedIn's software to obey them will make LinkedIn Research a nonstarter.

It's not a stretch to imagine how an ambitious government prosecutor could make a case for LinkedIn aiding and abetting insider trading. The law doesn't even require that money change hands; exchanging inside information for a thumbs-up reference on LinkedIn could very well qualify as a breach of the rules.

But that assumes anyone in Washington or New York is paying attention. Unlikely, given the mortgage mess. LinkedIn will likely go public on the basis of its hedge fund-juiced revenues long before an overtaxed SEC gets around to looking at how, exactly, the avaricious traders of Greenwich are getting their information.

Those insiders made lots and lots of money, and you won't be seeing any mea culpas from them like disgraced analyst-turned-Web publisher Henry Blodget's. It was your average American investor on the outside who took the hit on their retirement nest egg when InfoSpace went belly-up — not those who profited from flipping shares back and forth along the way.

Last fall, Rackspace went through a major outage that released many of its customers from their long-term contracts. Then, earlier this year, Tumblr founder David Karp publicly voiced his discontent with Rackspace and the company cut its prices by 80 percent in order to keep his business. Karp didn't take the offer, telling us its cheaper for startups to load up on redundant servers than to depend on Rackspace's 100 percent up-time promise.

With LinkedIn projected to earn 2008 revenue between $75 million to $100 million, former LinkedIn exec Keith Rabois, now at Slide, told the paper Hoffman and company need to go public sooner rather than later.

"Right now, LinkedIn just doesn't seem to be at the center of the Internet universe and an IPO would be an amazing marketing opportunity," he said.

Others aren't so bullish. After CEO Dan Nye said the company would only sell for "a lot more" than $1 billion, Silicon Alley Insider guffawed, noting that career site TheLadders.com recently poached LinkedIn's former head of corporate sales, Brendon Cassidy, with ease. Would he have stayed if he believed in LinkedIn's revenue upside? That's the question the Herald should have asked Rabois.

Lacy, citing an internal Slide presentation, says the company ranked ninth in reach on the Web, after Amazon.com, and now has 150 million users for its MySpace slide shows, Facebook apps, and other Web applets. That's an increase of 142 percent from a year ago, when Slide's valuation was reportedly a mere $80 million. A nice trick: Just double your user base, but see your valuation grow sevenfold.

The same way flatlining startups always do: the promise of an imminent IPO. Or at least that's what Trident Capital's Woody Marshall told VentureBeat.

Normally, a prissy letter to the editor would be in order. But since the story ran while NetSuite was in a quiet period, the time prior to an IPO when a company can only communicate through the smoke signals of SEC filings, NetSuite had to issue a "free writing prospectus" instead. While some of its complaints seem like quibbles, others seem like easily checked facts, such as when CEO Zach Nelson, shown here, joined the company. As far as I can tell, Times has not yet corrected the story. When the SEC has become your newspaper's unofficial ombudsman, you have a problem.

NetSuite says subsequent market demand may not immediately match share prices set by its auction-model IPO, according to the Wall Street Journal. Translation: The price could well drop. Somebody ought to warn Craig Ramsey, the Salesforce.com board member who invested in the company. Unless this is exactly what he wanted to happen. Crafty!

The most likely explanation: Facebook's $15 billion valuation has sparked a round of fear and greed inside the company. Early employees, themselves large shareholders, are agitating to have Zuckerberg let them take money off the table and sell some of their shares. Exploiting the rumor mill is a way for them to gain leverage with Zuckerberg, whose 27 percent stake in the company is worth $4 billion.

Indeed, one variation of the rumor I'd heard said CTO Adam D'Angelo, cofounder Dustin Moskowitz, and vice president Matt Cohler — Zuckerberg's 20something inner circle — selling shares alongside Zuckerberg, bringing the insider-sale total to $100 million. Also not true. But telling in its detail. If Zuckerberg's braintrust is seen to be selling, then others eager to cash out can argue they should, too.

So it seems I've been played by overeager Facebookers. Patience, young ones. Your turn will come soon enough. Facebook's employee rolls are growing so fast that it will soon cross the 500-employee mark — a milestone that, by next year, should force it to start filing financial reports like a public company. At that point, not going for an IPO would be foolish. At some point, Facebook's investors will demand an IPO. And then everyone will be able to sell.

This isn't the first rumor I got wrong. It won't be the last. All I can promise is that when I hear something, you'll hear about it. Isn't that the point of running a gossip rag?

Facebook's fastest growing demographic are those 25 and older. Members can now check off "networking" as an interest in their profiles. But Nye said he's doesn't feel threatened. Why?

Semantics. Facebook, he explains, is a social network. LinkedIn is for professional networking, he said. Oh. OK, so that doesn't really explain anything. But we'll help. One actual reason Nye can be optimistic is that unlike Facebook, some members find LinkedIn's service worth paying for. Nye said premium memberships will have grown 300 percent by the end of 2007. That's because LinkedIn is essentially a business-to-business play, which some human resource departments depend on to help find new talent. Of course, Nye didn't give actual numbers for premium memberships. It's easy to grow 300 percent if you buy a membership and get three friends to sign up.

According to reports, Ma said on Monday, "investors who had missed out on Google's IPO don't want to miss out on Alibaba's."

There are believers out there. Some are saying that because of its cozy relationship with the Chinese government and that nation's enormous population, Alibaba might have the potential to outgrow Google. That'd be great news for Yahoo, which owns 39 percent of of Alibaba and plans to buy $100 million in shares.

But hold on a second. Ma's Alibaba Group is just spinning off shares of Alibaba.com, a business which matches Chinese manufacturers with customers in the West. Shareholders in Alibaba.com won't benefit from the growth of Yahoo China, which Alibaba Group controls. So Ma's comparisons to Google are spurious in more ways than one.

(Photo by Refracted Moments)