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Venture capital is often the oxygen that gives life to early stage startups.  It’s the money that funds research and development; the money that pays salaries before a company becomes cash flow positive.  Accordingly, metrics which show the performance of the venture industry are often a useful barometer for the rate of entrepreneurship and state of new industries, not to mention a broader indicator of economic optimism.

Earlier this week Ernst & Young and Dow Jones’ VentureOne released their summary survey of U.S. Venture Capital Investments through the second quarter of 2007.  The numbers were generally good.  They show investments continuing their rebound from their 2003 low point.

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Hearst Corporation is largely known for its collection of magazines and newspapers which includes titles ranging from Esquire and Cosmopolitan to O to the San Francisco Chronicle but the company is also one of the worlds largest diversified media companies.  In addition to its print properties, Hearst has vast media holdings including stakes in television channels, Television networks including ESPN and A&E Networks and significant Internet properties and investments.

Today, Hearst announced UGO Networks (aka Underground Online) will join the list.  UGO will be acquired by Hearst’s Interactive Media division.  While the division has been an active investor in a number of Internet properties (Brightcove, Pandora, iVillage) this will be one of its first outright purchases of a large property.

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Despite solid revenue growth, it was a rough day to be a Netflix shareholder.  On later confirmed expectations of weakening profits for the rest of the year, the stock was punished and down 12% during regular trading hours.  It continued to fall into after-hours sessions.

In the company’s earnings announcement released today, Netflix (NASDAQ: NFLX) reported Q2 revenue up 27% over the same period last year to $303.7m.  Earnings on revenue were $26.6m (37c/share) or 31 cents a share after subtracting a $4.1m one-time payment from Blockbuster as part of the two company’s settlement of patent litigation. 

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Outside of a small microcosm, the phrase “social network” tends to bring to mind a short list of names usually led by MySpace and Facebook, and for those whose memory spans back to buzzword bingo from a few years ago, Friendster too. 

Beyond the two biggest names, and the first to break the ground, there are also hundreds of other sites that offer similar features and fall under similar classification.  Some of these sites target specialty niches like sports fans at particular universities (Fsurules.com) others are more multi-national in focus (Bebo).

San Francisco based Hi5 is among the larger social network sites beyond MySpace and Facebook.  And according to a report published yesterday on Venture Beat, they’ve raised $20m in a private financing Click to Read More

Microsoft rounded out the first big week of earnings season with an announcement on Thursday.  Unlike Google, which also reported, Microsoft safely met analyst expectations with sales of its Vista operating system solid enough to offset charges associated with the Xbox manufacturing troubles.

Microsoft earned 31cent/share after subtracting 8cents/share for one time charges for the Xbox 360.     Revenue for the quarter was up 13% to $13.37b.  Analyst expectations were for revenue of $13.27b.

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In ancient mythology, Icarus built wings of wax to fly.  As he soared, getting closer and closer to the sun, his wings began to melt.  Eventually, in most things, what goes up eventually comes down.  It’s gravity, laws of nature.   In business the same rules can apply too.  The higher expectations get, the more likely the odds of trouble.  The bigger you get, the harder it is to fly (e.g. grow at an outrageous rate).

After the close of markets today, Google reported its earnings for the second quarter. The numbers were good, 28% growth in revenue, but expectations were high up in the atmosphere. Analysts expected lower costs, and Google failed to meet profit expectations.  It was only the second miss since Google went public in 2004.  (Google does not give sales or earnings guidance and is tight lipped about expenses.   Without sharing such information, it’s especially difficult for analysts to make accurate projections. Given the history of growth, it was only a matter of time before analyst expectations exceeded reality).

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In May, private equity firm Terra Firma put forward a bid to buyout and privatize "Big Four" music label EMI.  That bid was supported by EMI’s board but has been slow to gain shareholder approval amidst anticipation of rival bids from either Warner Music or a partnership assembled by former EMI CEO Jim Fifield.  (As of Tuesday Terra Firma said it had secured only 3.82% of shareholder approval for its $4.88b (GBP2.4b) bid for EMI Group, according to published reports)

The UK Takeover Panel, which oversees and regulates these transactions, set today as the put up, or walkaway, deadline for counteroffers.  It was extended from July 12.

With the deadline looming, and a bidding war not materializing, it’s looking like the deal with Terra Firma will go through after all.

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