I wish I could just say that if you do X, Y & Z, you'll magically raise millions of dollars for your venture. But unfortunately, that's not how raising capital works.
One key reason for this is that most sources of money, like banks and institutional equity investors (defined as institutions like venture capital firms, private equity firms and corporations that invest), are essentially professional risk managers. That is, they successfully invest or lend money by managing the risk that the money will be repaid or not.
So, your job as the entrepreneur seeking capital is to reduce your investor or lender's risk.
For example, let's say that two entrepreneurs want to open a new restaurant. Which is the riskier investment?
• Entrepreneur A has put together a business plan for the new restaurant.
• Entrepreneur B has also put together a business plan for the restaurant...and he has also put together the menu, secured a deal for leasing space, received a detailed contract with a design/build firm, signed an employment agreement with the head chef, etc.
Clearly investing in Entrepreneur B is less risky, because Entrepreneur B has already has already accomplished some of his "risk mitigating milestones."
Establishing Your Risk Mitigating Milestones
A "risk mitigating milestone" is an event that when completed, makes your company more likely to succeed. For example, for a restaurant, some of the "risk mitigating milestones" would include:
• Finding the location
• Getting the permits and licenses
• Building out the restaurant
• Hiring and training the staff
• Opening the restaurant
• Reaching $20,000 in monthly sales
• Reaching $50,000 in monthly sales
As you can see, each time the restaurant achieves a milestone, the risk to the investor or lender decreases significantly. There are fewer things that can go wrong. And by the time the business reaches its last milestone, it has virtually no risk of failure.
To give you another example, for a new software company the risk mitigating milestones might be:
• Designing a prototype
• Getting successful beta testing results
• Getting the product to a point where it is market-ready
• Getting customers to purchase the product
• Securing distribution partnerships
• Reaching monthly revenue milestones
The key point when it comes to raising money is this: you generally do NOT raise ALL the money you need for your venture upfront. You merely raise enough money to achieve your initial milestones. Then, you raise more money later to accomplish more milestones.
Yes, you are always raising money to get your company to the next level. Even Fortune 100 companies do this - they raise money by issuing more stock in order to launch new initiatives. It's an ongoing process-not something you do just once.
Creating Your Milestone Chart & Funding Requirements
The key is to first create your detailed risk mitigating milestone chart. Not only is this helpful for funding, but it will serve as a great "To Do" list for you and make sure you continue to achieve goals each day, week and month that progress your business.
Shoot for listing approximately six big milestones to achieve in the next year, five milestones to achieve next year, and so on for up to 5 years (so include two milestones to achieve in year 5). And alongside the milestones, include the time (expected completion date) and the amount of funding you will need to attain them.
Example: Launch billboard marketing campaign over 6 months, spending $18,000
After you create your milestone chart, you need to prioritize. Determine the milestones that you absolutely must accomplish with the initial funding. Ideally, these milestones will get you to point where you are generating revenues. This is because the ability to generate revenues significantly reduces the risk of your venture; as it proves to lenders and investors that customers want what you are offering.
By setting up your milestones, you will figure out what you can accomplish for less money. And the fact is, the less money you need to raise, the easier it generally is to raise it (mainly because the easiest to raise money sources offer lower dollar amounts).
The other good news is that if you raise less money now, you will give up less equity and incur less debt, which will eventually lead to more dollars in your pocket.
Finally, when you eventually raise more money later (in a future funding round), because you have already achieved numerous milestones, you will raise it easier and secure better terms (e.g., higher valuation, lower interest rate, etc.).
It might surprise you what you can accomplish with less money! So write up your list of risk mitigating milestones and determine which must be done now and which can wait for later, focusing first on what is most likely to generate revenues.
Suggested Resource: Want funding for your business? Then check out our Truth About Funding program to learn how you can access the 41 sources of funding available to entrepreneurs like you. Click here to learn more.
The other day I wrote an article entitled "10 Obstacles That Are Limiting Your Growth." In it, I revealed 10 common things that block entrepreneurs and business owners from achieving the success they deserve.
Those 10 obstacles included:
1. Lack of Skill
2. Bad or Negative Attitude
There are many mental and personal blockages that can hinder you from achieving your full potential in business. Blockages in business can be compared to fatty deposits around your arteries that impede blood pumped from the heart from reaching its destination.
For you to succeed in your business, you must identify and eliminate such blockages promptly.
Here are 10 common blockages that can impede your success. As you read through the list, mark any of them that might be affecting you and/or your business:
1. Lack of Skill - As information increases, many business owners soon find out that there is much to learn. Whether it's getting up to date on new tax laws, learning about social media, or practicing negotiation techniques, take the time to keep your skills sharp.
2. Bad or Negative Attitude - While it may be easy to learn new skills, attitude is what makes or breaks a company. Whether you think you can or think you can't - you're right! Check your attitude frequently.
3. Lack of Focus - I always tell people that if they do one thing, they can do an A+ job; but that the second they do something else, they can only do a B+ job on each. And the bottom line is that to succeed in business, you must do an A job or better. So, make sure you focus on specific projects so you can excel at them.
4. Procrastination - Procrastination is high among the top five time wasters. Creating deadlines is an effective way of preventing procrastination. Though it may feel restrictive or even stressful, having a deadline can activate your brain and infuse new thoughts and ideas.
5. Monotony - It pays to try out something new once in a while. There is always a new instructional video with a different method from the text book methods learned in school. Doing something differently offers you the necessary relief from the routine and repetition that is common in many businesses.
6. Control Issues - Sometimes the tiny voice in your head may urge you not to give up control, so you end up micromanaging everything. It is important to have faith in the people you hire. Hiring qualified people for your business helps you to focus on specific tasks and minimizes your chances of overworking yourself.
7. Overworking Yourself - Sometimes you may overwork yourself even without realizing it. When you get overworked, you become less productive. Take it easy, go on vacation if possible. Your decision-making abilities become compromised when you are tired. Stick to a schedule and get some rest.
8. Seeking Approval - In business, you may sometimes unconsciously or even consciously wait for someone to encourage you or give you permission to take a step. Acknowledge your own abilities and make decisions on what is best for business, not based on pride of emotional approval.
9. Lack of Creativity - Keeping a journal can remedy a lack of creativity. Sometimes a new idea will pop up at a random time or place. Jotting down ideas and inspirations helps to unblock your mind. Apart from noting down random ideas for future reference, journals provide a useful way to track personal progress.
10. Thinking Small - With the current technological capabilities, it is easy to access success stories. Surround yourself with people who think big. Read books, blogs and watch motivational videos, etc. In business, if you aim low, you strike low. Aim high.
How many of these blockages did you circle? There is no right or wrong answer. Whether you picked one or twenty, you have work to do. Study the blockages you marked and start with the one you feel is impacting you the most.
Work on removing this blockage for 30 days. Then pick the next one that is having an impact on your business and start working on that one. As you stretch beyond your comfort zone and tear down barriers, your business will grow.
Last week, I shared three themes percolating in the dynamic Internet of Things (IoT) movement: 1) Wearable Devices driving health and wellness breakthroughs 2) Embedded Sensors “incrementally” improving industrial productivity, and 3) The converging trends of miniaturization, affordability, and “de-wireization” driving energy efficiencies and cost reductions the world over.
These are big themes - breathtaking in their “macro” - but sometimes very difficult to translate to specific opportunities from which we as entrepreneurs and investors can individually benefit.
But try we must, both because of the sin that it is to see an opportunity and to not pursue it, and if we don't…
…we run the very real risk of being overrun by transformations so profound and all-encompassing as to threaten to the point of obsolescence virtually every business and investment model.
Overly dramatic? I don't think so.
For if the last 20 years of technology advances have taught us anything, it is that global, online connectedness naturally creates conditions where choosing winning strategies don't just give companies a leg up, but allows them to capture all of the market (including its profits).
Examples of this phenomenon?
Think Google for search, Facebook and LinkedIn for social networking. Twitter for one-to-many communication.
And how about SpaceX for rocket technologies? WhatsApp for free SMS? EBay for online marketplaces? Craigslist for classifieds?
The list goes on and on.
And this coming Internet of Things - with estimates as high as 25 Billion devices being online in some form by 2025 - will provide far greater opportunities for new entrants to rapidly scale and for incumbents to be rudely displaced than your “Father's Internet” ever did.
The revolution here can be boiled down to one word.
And the need to manage and interpret the vast and ever-streaming treasure trove of it that will always be flowing from these billions of interconnected devices.
I thought General Electric's Head of Software Bill Ruh, explained it best at Kamal Ahmed’s and Ali Tabibian’s IoT event last month. The example he used was of the jet engines that GE makes for Boeing and other aircraft manufacturers that both create and allow for tracking on huge amounts of performance data.
Now when that data confirms the belief of the technicians managing those engines, it is used.
But, when it contradicts long held assumptions and beliefs, more often than not it is ignored.
In an IoT world, this belief system, this hubris, one’s qualitative judgments in contradiction with “the facts” needs to be quickly and ruthlessly discarded.
And it must be replaced by the conviction, faith, and sternly pursued managerial practice that these facts, this data above all else is king.
Sound harsh? Un-feeling?
A foreshadowing of a Rise of the Machines world where we humans are regulated to a feeble processing power second class?
But the optimists among us see many examples of long-held human prejudices cracking and disintegrating in the face of impersonal yes but also agenda-free data.
And another point – quality data analytics drives efficiency which in business and in life ranks right up there with sound strategy and impeccable ethics as pillars of asset and profitability growth.
When looked at this way, that in an IoT world good data analytics and analysis no matter the business trumps all, what naturally follows is that the particular business that one intends to start, build or invest in is almost secondary.
More important is one's relationship, one's willingness to let the data - well collected, accurate, and regularly and properly analyzed data - guide ones business decisions, strategies and tactics.
This is very hard to do in practice, as old habits and ways of thinking and doing die very hard.
But, as the habit is built, the competitive cost, and positioning advantages - built up incrementally over time in a business’ product and service offerings, in its marketing and sales conversion funnel, in its operational efficiencies - become unassailable.
And then, in the eternal words of the great Charlie Munger - Warren Buffet's investment partner for over 50 years - a business approaches a Low Cost, Hiqh Quality nirvana where assets and profits build steadily and wildly over time.
Hail to the Machines.
To Your Success,
What Is Crowdlending?
In brief, Crowdlending is when individuals lend you money.
This is important because oftentimes banks don't want to lend money to entrepreneurs and small business owners.
Crowdlending eliminates the banks as an intermediary and allows individuals to lend money to other individuals. Another name for Crowdlending is "peer to peer" lending.
A Brief History of Crowdlending
Crowdlending has been around for several years. The biggest two Crowdlending companies/websites are Prosper and Lending Club.
While the crowd-loans on these sites are structured as personal loans to the business owner, they can be used for business use. For example, small business owner and clothing designer Lara Miller has received three loans via Prosper which she used to launch her new website and clothing lines.
Clearly, you could consider taking a loan for your business from a friend or family member. However, with Crowdlending, you have a much larger number of potential lenders. Also, while not being able to repay your loan is always a terrible situation, it's clearly worse when you know and see the lender often.
Additionally, many individual lenders on Crowdlending websites take a portfolio approach. That is, they lend to several people. So one of their loans defaulting may not be devastating to them as it might to a friend or family member making just one loan.
Debt Versus Equity
In brief, raising equity is selling shares of your company. You are not required to pay interest on the funding or the principal back. However, the investor owns a piece of your company and if/when you exit, they will take their share.
Conversely, with debt, you have to pay both interest and the principle back.
It is important to note that equity is oftentimes MUCH more expensive than debt in the long-run. Let me give you a simple example.
Let's say you sell 40% of the equity in your business for $1 million. A year later, you are able to sell your company for $10 million. The investor would get $4 million of the sales price (40%). So, the cost to you of the $1 million investment was $4 million.
Conversely, let's say the investor lent you the $1 million at 10% interest. In that case, the cost of the funding would have been $1.1 million - which is the principle and interest you would have to pay back.
In this scenario, debt funding would have cost you ONLY $1.1 million, nearly 75% less than the $4 million cost of equity funding.
Crowdlending Versus Debt
Crowdlending, gives you several benefits over traditional debt or bank loans:
1) Your chances of raising Crowdlending are much higher since banks reject many more loan applications
2) Crowdlending gets you lower interest rates than banks because you are eliminating the bank as a "middle man"
3) Crowdlending has much fewer requirements with regards to the application and documents you need to submit
4) Crowdlending dollars are generally raised much faster than bank loans
Crowdlending For Businesses
I have been telling entrepreneurs about Prosper and Lending Club for years. Because they are relatively easy and low-cost forms of funding. However, they both have a big negative, in that you can generally only raise loans less than $35,000.
That's why I will thrilled when I recently spoke with Endurance Lending Network.
Endurance has amassed a bunch of non-bank lenders including successful entrepreneurs, wealthy individuals, family offices and institutional investors. And, these individuals lend between $25,000 and $500,000 to businesses - the amounts entrepreneurs and business owners actually need.
Crowdlending is a great new way to raise money to start or grow your business. It's much easier, faster and less expensive than both bank loans and equity funding, making it a perfect choice for most entrepreneurs and business owners.
I had the good fortune to attend GTK’s and Pillsbury’s amazing Internet of Things Private Executive Event in Palo Alto last week.
It was a star-studded, technocratic affair - drawn from Kamal Ahmed’s and Ali Tabibian’s amazing Silicon Valley network, by the high-profile speakers and panelists including Qualcomm’s chairman Paul Jacobs, General Electric's Head of Software Bill Ruh, Cisco's Vice President Tony Shakib, Splunk CTO Todd Papaiaonnou and by the incredibly exciting and timely topic itself.
Whatever name you want to call it - the Internet of Things (IoT), the Internet of Everything, Machine-to-Machine Computing, the Embedded Internet, Smart Services - the fundamental idea is that we are moving rapidly to a world where online connectedness exists not just on our desktops and smartphones, but rather is woven into the very fabric of our world (cars, planes, factories, our bodies and more).
This coming reality is scary to some for sure, but the myriad of productivity and efficiency gains an IoT world promises is as exciting as business gets.
And so the attendees - from Fortune 500 tech stalwarts like Intuit, Amazon, HP, and Oracle, to high-profile VCs like Andreessen Horowitz and Google Ventures, to some of the hottest IoT start-ups in the world (StreetLine, Jasper Wireless, Liquid Robotics) - listened as the speakers shared both the key IoT tech. advances (miniaturization, affordability, de-wireization) and the corresponding best areas of business opportunity.
My Three Takeaways:
Better Health and Wellness. Any fears of big brother and losses of privacy in an IoT world are well offset by the opportunities to save and prolong lives via inexpensive, unobtrusive, and accurate monitoring of “on the body” health data and events.
We can see the possibilities in the early successes of the quantified self-movement, pioneered by companies like FitBit and Jawbone that monitor sleep, exercise, diet, heart rate, and body temperature, and more.
As technology and the collective data sets naturally grow and improve, the opportunity to intervene quickly (and remotely!) in both catastrophic and chronic health events is incredibly exciting.
The Industrial Internet. General Electric’s Billion Dollar Bet to transform the 122 year old company from one based on building and selling large and complex machines - jet turbines, locomotives, and power plants - into one based on selling analytics and services to ensure that these machines run incrementally ever-more efficiently highlights the promise of the Industrial Internet.
Its decidedly low glamour goal? To apply a form of Moneyball to the gigantic Old Economy backbone of our modern world and “eek out” 1%, 2%, and 3% efficiency gains that in their aggregate represent trillions of dollars of increased productivity and profitability.
Energy. Energy is a HUGE area where converging and coalescing IoT tech advancements are starting to allow for massive reductions in our global carbon footprint while making the energy to power our cars, drive our factories, and light our homes cheaper and more accessible and reliable.
Great for those of us in America, but life-changing for the three billion people around the world without daily access to electricity, heat, clean water, and reliable food.
An overly optimistic take? Perhaps.
But even if only 1/10 of the productivity and efficiency promises shared in Palo Alto last week come to pass, IoT represents a business opportunity so large, multi-faceted, and all-encompassing as to make even the most grizzled and cynical market observers more than a little giddy.
And that about sums up my time in Palo Alto last week - a bunch of big, technologically literate kids talking and acting as if we all together are about to enter one of the biggest candy stores in any of our lifetimes.
To Your Success,
The incredible prices paid for high flying technology stocks this past year - whether it be in the form of acquisitions, in the cases of Dropcam, Open Table, WhatsApp, OcculusVR, and Nest, or in the form of financings, in the cases of Uber, Airbnb, Dropbox, has raised the age old questions, worries, and doubts about whether this market and these technology deals constitute a bubble.
And if so, when and how it will burst.
These concerns are mirrored in the recent price run-ups in both the stock and real estate markets.
As detailed last week, since March 2009 the S&P index has almost tripled, while real estate prices are up 10.5% this year and are now approaching their 2007 highs.
So, will it all inevitably come crashing down? Again?
And more importantly - whether it is or isn't a bubble - how can the individual entrepreneur and/or investor profit and win in the current conditions?
Let's take the bubble question first.
By almost any objective standard, paying into the billions of dollars for businesses with little revenues and/or significant operating losses - as is the case with all the companies mentioned above - is absurd.
There are very few plausible scenarios where the cash flow that these companies will be able to generate can any way justify the prices being paid for them now.
It is just hard to see how Nest will ever be able to sell enough thermostats, Occulus enough virtual reality headsets, Uber to take on enough ride shares, Airbnb enough spare bedroom rentals to justify the prices being paid for their businesses.
So, in this context yes, these businesses are wildly over-priced and there is a very good likelihood that the investors in them will experience a painful comeuppance.
This, however, represents a theoretical view of pricing, one driven by the relationship between current and future cash flows.
In the real world however, prices are determined by supply and demand.
And more to the point, by the relative abundance or paucity of Next Best Alternatives.
In this context, these prices make a LOT of sense.
You see, what we have in the world today is a lot of cash chasing a very small number of growth opportunities.
Some of this cash comes from expansionistic Monetary Policies pursued by the Federal Reserve and other Central Banks.
And a lot more of it comes from massive commodities-driven wealth in places like Russia, Africa, South America, and the Middle East.
And the owners of all this cash - trillions upon trillions of dollars of it - are naturally seeking to put it to work.
And their options for doing so are far more limited than one might think.
Bank interest rates the world over remain pathetically low.
Political instability, corruption, immature financial systems and securities laws close off private equity-type investments close to home.
So when it comes to true growth opportunities – the kinds driven by technologies that transform industries and markets - businesses like these are extremely unique and relative to the amount of cash out there seeking to be put to work, also in exceedingly short supply.
These global macroeconomic conditions show no sign of abating, so from these perspectives No are not high and the current conditions can and should continue for some time.
So that leads to our second question - how can today's investors and entrepreneurs benefit and win in these markets.
Well, as discussed last week, first of all by cultivating a bullish mindset in line with these strong economic times.
By recognizing the Sucker’s Bet that cash now is and likelihood will remain for the foreseeable future.
By fully embracing that this is not 2009 anymore - that the Great Recession has ended and that we are in the beginning stages of a Technology-Driven Growth Boom with no end in sight.
And to be resolved to grab your piece of it.
To Your Success,
Last week, I talked about Getting Robbed at the Bank - how today's Low Interest Rates (0.1%!) combined with High Inflation Risk make this one of the worst times ever to build wealth via savings.
Thankfully, this may also be one of the best times to invest, as never before have there been so many well-performing alternatives.
Start with Housing: 95 of the 100 largest US Metropolitan areas have seen housing prices rise since last year, with CoreLogic’s much-watched Home Price Index showing an average 10.5% Year-over-Year increase.
This has mirrored a solid rise in the Public Stock Market, which despite its extremely Poor Long-Term Performance, is up 5.5% this year.
And for those that can still remember the 2008 talk of Doomsday and of the collapse of our financial system, it is heartening to note that the S&P is up an amazing 189% since its March 2009 nadir.
And as good as the news has been in the Housing and Stock markets, it pales in comparison to this Golden Age of technology and venture investing that we are currently experiencing.
Almost every day comes barely able to believe valuations on technology company financings, acquisitions, and public offerings.
From last week's news of Open Table being purchased by Priceline (itself once an incredibly high flying Internet darling) for a whopping $2B, to transportation service Uber commanding the highest pre-public technology company valuation ever, to the fantastic and quick riches made by the early investors in companies like Nest, Occulus VR, and WhatsApp, the list just goes on and on.
And while it is human nature to feel more than a little jealous of those lucky enough to be the Founders and the Early Investors in these companies, what we really should feel is gratefulness for their roles in helping to right our national economic ship.
Start with jobs - unemployment went from a very impressive low 4.4% in 2007 to a very discouraging 10% by October 2009.
But with the addition of another 217,000 jobs in May, Unemployment now stands at a very manageable 6.3%, and there are now more people with jobs in the United States than ever before.
And when asset values go up, when purchase and sales transactions occur that result in huge capital gains, when people are working and earning good wages, Tax Receipts increase too.
And, in turn, the National Credit Rating improves.
After being embarrassingly downgraded in 2012, S&P now says that they are prepared to increase the rating back to AAA as the ongoing evidence of the economic good times (and Congressional Good Behavior) continues to build.
So for investors, this is as good as it gets. Real Estate, the Stock Market, Technology and Private Equity, Jobs, the Deficit, and more.
All that is lacking now are those “psychological” final pieces of the puzzle: Optimism and Confidence.
There is still a holding back, an unwillingness to believe that all of it is real and not a mirage.
And as a result, when it comes to those very precious dollars that we do not spend, that we put away for the future, we are still saving too many of them and investing too few.
Yes, we must proceed carefully and deliberately - because investing always involves risk - but we most proceed.
Leaving money in the bank is not a viable option anymore, not when interest rates are so low, not when the threat of inflation is so high.
And certainly not when the investment pickings are so good.
To Your Success,
I took my six and eight-year old sons to the bank this weekend to open their first savings account.
It felt like the right thing to do - they are at an age where they can understand the power and importance of money, albeit if mostly from the perspective of the things that can be bought with it.
But the hope of course is that the habits of savings, of delaying gratification are ones that will stay with them for a lifetime.
So off we walked to our local Bank of America branch - both boys clutching around $100, and proudly announcing our intentions to the teller.
We were then escorted to a BofA “personal” banker, who graciously walked us through the account opening process.
All was going quite swimmingly, and then I did something that I knew I shouldn't but couldn't resist.
I asked what the interest rate was.
And our banker glibly informed me that it was one tenth of one percent. 0.1 %.
And then instead of feeling all fatherly and a great role model…I felt like a real chump.
Every year my boys will earn one dime in interest.
Let's say they really button down and build up their accounts to $1,000.
That will get them one dollar per year.
Heck, how about those folks that work hard and save for a lifetime and accumulate $1 Million in savings?
Well, in the bank they are now earning a beyond miserly $1,000 per year.
Sure there are savings accounts that pay a little more, but has there ever been a time where the risk – reward gap between saving and investing was greater than it is right now?
Let’s define savings as what I did with my boys this Saturday: Putting and leaving money in the bank.
And let's then define investing as pretty much everything else: Public and Private Stocks, Bonds, Real Estate, Commodities, Collectibles, and more.
When it comes to return (0.1%), the comparison is an utter and complete joke.
But, it is when it comes to Risk, well…
…Investing, of course, involves risk. Always has, always will.
And while it is understood that while cash savings offers far lower returns, the tradeoff always was the assurance that your money was safe in the bank.
But in today’s economy, very unfortunately it simply is not.
Why? Because of massive inflation risk.
As in 10%, 15%, 20% annually or more.
And potentially coming not in the distant future, but very possibly in the next few years.
Since 2008, our Gross National Product has increased approximately 10%.
In that same time, the Federal Reserve has expanded the Money Supply more than 400% - from $800 billion in 2008 to over $3.9 trillion today.
As in four times as many dollars floating around here and abroad than there were six years ago.
Even generously taking into account the fact that the Greenback remains the reserve currency of choice the world over, this can only account for a fraction of the money supply increase.
Inflation – and lots of it – will eventually cover the rest.
And when it does, the savers amongst us are in for a world of hurt.
This is sad, because in so many ways the savers are the responsible ones - delaying gratification.
Planning for the Future. And for a rainy day.
But when the inflation deluge comes, our poor and pathetic savers probably won't even be able to afford an umbrella.
When I think of it like this, next week I'm marching my boys back to the bank and we're closing those accounts.
On the walk back, I'll teach them how to invest.
To Your Success,
Over the last three weeks, we have discussed the various factors that drive the 25% IRR return potential of the startup and emerging company investing class.
We then reviewed the various approaches to gain exposure to this return potential: Investing directly in operating companies, doing so through a Venture Capital Fund, or “Doing as Warren Does" and utilizing “The Berkshire Approach” of investing in an operating company that in turn invests in other operating companies.
Unfortunately, all of these approaches rely on something in exceedingly short supply in today’s financial marketplace.
Now, wouldn’t it be great if investing actually worked like all of those lovely ads that mutual funds, brokerage firms, and insurance company say it does?
As in, Trust Us and we will take care of it for you.
If this were really so, it would free up so much valuable time and energy.
For family, hobbies, volunteer work, and more…knowing that one’s financial future was in someone else’s safe and capable hands.
But it just doesn’t.
A big part of the problem is that "Us" is for the most part large Wall Street banks and brokerage firms.
And if the last few years have taught us anything, it is that banks and brokerage firms are NOT places where smaller investors (and today small is anyone with less than $100 Million) should be expecting anything approaching extraordinary and high trust treatment.
Now, let me be clear: I am not a conspiracy theorist nor do I see Wall Street as at the heart of our Country's ills.
But I am someone that has looked at stock market return records of the past 15 years and sees too many people on Wall Street making a lot of money while delivering extremely average returns.
The word that best describes a state of affairs like this is institutional.
Self-preserving, bureaucratic, slow, dull.
And what it creates is a just a lot of…Blah.
Tired, mediocre ideas.
Blah Results and Blah returns.
Think of it this way: How much of a fish out of water would an innovator and a wealth creator like Steve Jobs have been on today’s Wall Street?
Yet, for the very most part, it is to this world that most of us turn to manage our money.
So when results come back that are barely average, we should not be surprised.
Now, there are alternatives.
Let us not forget that the most famous and lauded investor of them all hails from Omaha.
And more to the point, the great entrepreneurs, the builders of businesses, those that actually create wealth…
…have always percolated at the edges and NOT in financial centers.
In The Silicon Valleys and The Silicon Beaches and The Salt Lakes and The Seattles and The Austins of the World.
The challenge is to see and act upon this reality.
To not be swayed nor frightened by the financial industry’s omnipresent marketing machine.
Because just like the greatest investor of them all became famous and fabulously wealthy far from Wall Street…
…We too can earn portfolio - transforming returns by doing something not any more complicated than thinking and acting for ourselves.
And when we do, a world of opportunities open up that are anything but institutional.
To Your Success,